Address liquidity crisis of entire T&A sector: CITI to RBI

"The Indian Textile & Apparel (T&A) sector is a highly capital- and labour-intensive sector and the ongoing COVID-19 pandemic has badly affected this sector. The one-time loan restructuring will provide some relief to all the T&A companies falling under the MSME criteria," CITI chairman T Rajkumar said in a press release.

Rajkumar also welcomed the decision of the RBI for constituting an Expert Committee under the chairmanship of KV Kamath for one-time restructuring of loans.

Rajkumar said that T&A companies usually carry a stock of few months and unless the demand of textile products comes back, industry will not be in a position to take on fresh orders as well. This has led to an unprecedented liquidity crisis in the T&A sector.

He further stated that the banking sector today is hesitant to lend to T&A Sector due to uncertainty of cash flows. "While the recent debt restructuring is focused only on MSME sector, T&A MSMEs are highly dependent on large manufacturers and large apparel retailers. If the liquidity crisis among the larger companies is not addressed soon, it will have a multiplier effect on the MSMEs as well."

Rajkumar made an appeal to the RBI Governor to address the issue of liquidity crisis of the entire T&A sector by taking certain measures like directing all the banks to lend 25-30 per cent extra working capital to T&A industries for which Government of India may extend partial guarantee, allowing conversion of part of Working Capital facilities availed by Retail Businesses into Working Capital Term Loan (WCTL) and reassessment of working capital limits, removing NPA classification temporarily for all businesses availing restructuring or refinancing due to the COVID-19 crises.

The T&A sector in India employs about 110 million people directly and indirectly and contributes about 11 per cent to the foreign exchange earnings.

Fibre2Fashion News Desk (RKS)