Indian Textile Ministry mulls new rating system to ease credit flow

21 Jul '25

2 min read

Indian Textile Ministry mulls new rating system to ease credit flow

Pic: Shutterstock

Insights

India is considering a textile-centric credit rating system to improve funding access for textile companies, especially MSMEs.
Textiles Ministry, in consultation with industry stakeholders, discussed sector-specific credit hurdles and proposed solutions.
CITI hosted the session, highlighting working capital issues, underutilised MSME credit schemes, and the need for improved risk perception frameworks.

India is exploring the idea of a textile-centric credit rating system to enhance the understanding of textile companies’ financial health and improve their access to funding from banks and other financial institutions. Neelam Shami Rao, Secretary, Ministry of Textiles, has urged stakeholders in the textile industry to develop a textile-specific credit rating protocol. The proposal was discussed during a brainstorming session on ‘Credit Access Issues in the Textile Sector’ held last week.

The session, chaired by the Textile Secretary, aimed to explore potential solutions in consultation with industry representatives, financial institutions, and policy stakeholders.

The Ministry of Textiles has conducted a detailed study on the credit access challenges faced by the textile sector, particularly by MSMEs. A comprehensive note outlining these challenges and proposed solutions has been shared, capturing key concerns consistently reported by the industry.

The session was organised by the Confederation of Indian Textile Industry (CITI). Industry representatives highlighted the difficulties faced in securing working capital, noting that the specific characteristics of the textile sector are often not well understood by banks. Issues such as long payment cycles, job work arrangements, and other sector-specific nuances were identified as areas requiring better recognition by financial institutions to improve credit accessibility.

A significant deterrent has been the prevailing risk perception of the textile industry under existing credit rating systems. This underscores the need for a dedicated, textile-specific credit rating framework.

It was noted that separate funds already exist to support sustainable production—such as those for energy efficiency and water management. However, stakeholders suggested consolidating these into a single ‘Green Fund’ to streamline investment support in the textile sector. Industry members have been invited to share their suggestions on this proposal.

The Department of MSME operates the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. However, the industry reported challenges in accessing this fund, resulting in low utilisation by textile MSMEs. It was therefore recommended that disbursements under this fund be closely monitored to improve efficiency and relevance for the textile sector.

Lastly, awareness and procedural hurdles related to credit schemes were acknowledged. In response, the establishment of cluster-level credit facilitation centres was proposed.

Fibre2Fashion News Desk (KUL)

More Textiles News - India...