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Loans to 300 textile mills to be restructured

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2-year moratorium, conversion of working capital debt allowed An inter-ministerial group on Thursday finalised a list of over 300 ailing textile mills whose loans will be restructured. But the group left it to the Cabinet to extend textile upgradation fund scheme benefits to loans classified as non-performing assets (NPA) after repeated restructuring. “Under the existing clause in the textile upgradation fund scheme (TUFS), if an account becomes NPA, the interest reimbursement will not be available for that period. However, the industry has been asking for a relaxation of this clause and the inter-ministerial group has left it to the cabinet to take a call,” a senior government official told Financial Chronicle. The group consisted of officials from the planning commission, the textile and finance ministries and half a dozen textiles industry representatives. The group agreed to giving a two-year moratorium on repayment of term loans and to allowing conversion of working capital into term loans repayable three to five years. This is part of a Rs 35,000 crore, three-year debt restructuring package announced in May. Nearly Rs 15,500 crore worth of loans will be restructured in the first year. This includes Rs 12,415 crore in long-term loans and Rs 3,054 crore in short-term working capital loans. Of this, proposals worth Rs 9,938 crore are from mills that went in for repeated restructuring. The package was to be implemented from August 1, but got delayed as sorting out the details took time. “The list of borrowers has now been provided to the banks and the process of restructuring will start through special windows,” D K Nair, secretary-general of the Confederation of Indian Textile Industry, said. The industry is going through a difficult phase and is unable to generate even normal profits to repay outs¬tanding loans under TUFS. The outstanding as in March was Rs 39,551 crore. But the overall exposure of banks to the textile industry, inclu¬ding TUFS, is much higher at Rs 1,71,000 crore. Under TUFS, launc¬hed 12 years ago to help the industry mo¬dernise, banks gave Rs 74,625 crore in all, of which the outstanding is Rs 39,551 core. Bank of Baroda capital markets felt debt restru¬cturing would have no reve¬nue implication either for the government or banks as the current interest rates on the loans would be constant and which the mills must pay since there was no pro¬posal to reduce interest rates in a debt restructuring exer¬cise. The government has also enhanced subsidy under TUFS to Rs 1,000 crore over the next five years.

                 

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