A meeting of a Group of Officers will be held on July 13 in New Delhi to formulate debt restructuring proposals on a case-by-case basis for the textile industry.

In a letter to the Union Ministry of Finance last month, the Reserve Bank of India (RBI) said that it had no objection to proposals such for two-year moratorium on term loans and conversion of working capital into working capital term loan.

However, the apex bank felt that the asset classification benefit on second restructuring was not justified.

Restructuring package

Industry sources said that the small and medium-scale textile mills in Tamil Nadu and Andhra Pradesh were the worst affected because of the cotton price fluctuations last year. Since the Government had announced a debt restructuring package, it should now look at the options of implementing it, they added.

Case-by-case basis

In May this year, the Union Textile Minister Anand Sharma had announced that a debt restructuring package would be considered on a case-by-case basis by individual banks for the industry and that an inter-ministerial committee of senior officials would be constituted to co-ordinate with industry and banks to expedite the restructuring.

The restructuring proposal included a two-year moratorium on term loans, a special provision in non-performing asset norms to avoid asset reclassification, and conversion of working capital eroded into working capital term loans repayable over three-to-five years.

Subsequently, the Department of Financial Services sent a communication last month to the Chairmen and Managing Directors of banks reiterating that banks should consider eligible stressed loan accounts in the textile sector where restructuring, including second restructuring, is required.

The meeting of the inter-ministerial committee on July 13 with representatives of the industry and banks will take up discussion on the communications of both the RBI and the Department of Financial Services.

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