The crisis in the industry because of High Court order is a reason

The banks in the district which had extended credit to set up 18 Common Effluent Treatment Plants in Tirupur cluster are in a state of predicament as the outstanding hover over Rs. 500 crore owing to the crisis experienced in the dyeing industry.

As on January 1, the outstanding stood at Rs. 507 crore and the flow of repayment stopped almost completely in the subsequent months following the closure of entire dyeing and bleaching units by the Madras High Court in the second half of January, banking sources toldThe Hindu. In all, 422 dyeing units and 101 bleaching units out of the total 750-odd dyeing and bleaching units in the cluster were attached to the 18 CETPs.

Nationalised banks

Lead Bank sources told this paper that five nationalised banks and Housing and Urban Development Corporation Limited (HUDCO) had extended total credit of around Rs. 600 crore to set up/modernise the CETPs and the soaring outstanding had started affecting the ratings of the banks involved.

The profits of these financial institutions had shrunk significantly due to stoppage in the flow of interest payment, sources said.

Of the Rs. 507 crore, the outstanding with Union Bank of India, which had extended loans to nine CETPs, stands the highest at Rs. 295.9 crore.

The Indian Overseas Bank, which gave loans to four CETPs, had the second highest outstanding at Rs. 150 crore.

The other banks that had financed the CETPs include Syndicate Bank, Uco Bank and Indian Bank (one CETP each).

Banking sources said that the institutions involved in the lending of capital were now hoping to see an end to the crisis in the dyeing industry at the earliest so that the outstanding did not go further high.

RBI had conducted a study in the cluster recently and obtained suggestions from various stakeholders crisis to find out ways to mitigate the problem from the banking perspective.

  • UBI's outstanding is Rs. 295.90 crore

  • IOB's outstanding is Rs. 150 crore