RBI okays Indian textile debt rejig on case-by-case basis

16 Jul '12

2 min read

The Reserve Bank of India (RBI) has asked all banks to consider debt restructuring of the Indian textile industry on a case-by-case basis.

The apex bank has advised the banks to open special windows for the purpose between August 1 and October 30, 2012.

The Indian textile industry has been affected by slow demand in local and export markets, as well as high fluctuation in cotton and yarn prices, and has been facing difficulty in repaying term loans.

However, the Finance Ministry’s suggestion to consider debt restructuring of the entire Indian textile industry was rejected by the RBI.

An estimated amount of Rs. 350 billion, of the total outstanding debt of about Rs. 1600 billion in the Indian textile sector, requires restructuring.

The RBI said large borrowers in natural as well as man-made fibre sectors are performing relatively better and debt revamp is only required in the small and medium segments.

The reduction in cotton prices from their last year’s peak levels would increase the profitability of the textile units, which would enable them to repay their loans, the RBI predicted.

In 2008, the RBI granted special exemption and provided for a second debt restructuring of the entire Indian textile sector, in order to deal with the global financial crisis.

Fibre2fashion News Desk - India

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