Textile debt recast flops as mills fight to avoid NPA tag
The much-touted debt recast scheme for textile companies seems to have come a cropper. Roughly half of the 307 textile mills which had sought a restructuring of loans worth over R12,000 crore last year are losing interest after the Reserve Bank of India (RBI) declined to ease norms on non-performing assets (NPAs), senior industry executives said.
Since most of these cash-starved mills had already been granted this facility during the 2008-09 financial crisis, any further restructuring would render their loans NPAs and deprive them of subsidy and benefits extended under the textile upgradation fund scheme (TUFS). Despite a slight pick-up in demand for textile products of late, as many as 91 of the 276 listed textile firms suffered losses in the first half of the current fiscal, although the situation was still better than a year earlier when 120 firms had recorded losses.
“Many of these mills — especially the relatively larger ones — are either taking corporate loans at high interest rates or trying to garner funds from other sources to stay afloat. The reason is, a mill seeking second debt restructuring will take at least 2-3 years to get out of the NPA trap and until then, it will not get benefits under the TUFS. Moreover, their future borrowing costs will also rise as their risk potential would increase due to the NPA factor,” said DK Nair, secretary-general of the Confederation of Indian Textile
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