Imports of low priced yarn giving bankers sleepless nights

05 Feb '09

2 min read

Imports of cost competitive spinning yarn from neighbouring India, is giving sleepless nights to most bankers who have advanced loans to spinning mills across the country. Their fears are unfounded as banks have advanced huge amounts of loans to these spinning mills, which have high capital costs.

Now with cheap Indian yarn seeping in to the markets, the bankers are worrying about the repayment capabilities of these mills, since they have huge exposures and are scared that these loans could turn in to non-performing assets (NPA's). Already, according to sources, some of the mills have started delaying repayments.

The mills are holding on to large inventories partly due to the Indian influx of low priced yarns and also due to slow off take from the weaving units of the country, due to the slowdown in exports from the sector. In the last few years, there has been a huge increase in spinning spindle capacity as Bangladesh was importing a major volume of yarn required to feed its apparel industry needs.

Imports of yarn from India were restricted earlier, but the last care taker government in its last days withdrew the restrictions on import of yarn from India. Indian yarn is imported at 15-20 US cents per pound lower than those prices quoted by Bangladeshi spinners.

Fibre2fashion News Desk - India

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