Covid crisis: Textile industry wants debt restructuring package, extension of moratorium till March 31, 2021

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Published: May 27, 2020 12:01 AM

The textile and clothing industry wants the banks to be advised to transfer full benefits of RBI’s recent and earlier repo rate reductions.

The textile industry needs one-time restructuring to make it viable and vibrant in view of the emerging international opportunities to replace China.The textile industry needs one-time restructuring to make it viable and vibrant in view of the emerging international opportunities to replace China. (Representative image)

Confederation of Indian Textile Industry (CITI), the apex body for Indian textile and clothing sector, has demanded a debt restructuring package and further extension of moratorium period till March 31, 2021.

Welcoming the recent monetary measures announced by the RBI governor, CITI chairman T Rajkumar said: “The foremost demand of the textile and clothing industry was a debt- restructuring package, the only solution to all the financial problems being faced by the industry. The textile industry needs one-time restructuring to make it viable and vibrant in view of the emerging international opportunities to replace China.”

Rajkumar stressed that repo rate cuts initiated by the RBI on several occasions in the last one year had not been fully transmitted by banks to borrowers —whatever passed on were minuscule. The textile and clothing industry wants the banks to be advised to transfer full benefits of RBI’s recent and earlier repo rate reductions.

Though the decision of margin money reduction, and deferring of interest on working capital for six months with an option that the interest on moratorium can be converted into FITL or term-loan and can be repaid by March 2021 was beneficial, repaying interest amount within next six months would be a daunting task for the T&C industry that is grappling with the lockdown situation at the moment, Rajkumar said.

The RBI governor’s decision to extend moratorium period for another three months to August has definitely brought some relief to the T&C industry, but the moratorium period should further be extended till March 31, 2021, to ease the financial burden on companies in an industry badly hit because of its highly capital and labour intensive nature, the CITI chairman said. The industry provides employment to more than 110+ plus million people.

CITI chairman thanked the RBI governor for reducing repo rate by 40 basis points, under the liquidity adjustment facility (LAF), bringing it down to 4% from 4.40% with immediate effect. Accordingly, the marginal standing facility (MSF) rate and the bank rate stand reduced to 4.25% from 4.65% and the reverse repo rate, under LAF, now stands reduced to 3.35% from 3.75%.

The extension of maximum possible period of pre- and post-shipment of credits from 12 months to 15 months would boost the prospects of the industry, he said. He hoped that in the coming days, RBI would come out with more relaxing norms as the outlook towards economic activity other than agriculture is likely to remain depressed in Q1 and Q2 of 2020-21, and the recovery is likely to be expected in Q3 and Q4 as supply lines would gradually be restored to normalcy and demand would gradually revive.

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