Debt Recast Scheme Modified For Textile Units

The government has substantially modified the debt restructuring scheme for viable and potentially viable textile units by extending it to those with a minimum debt exposure of Rs two crore. Besides, the repayment period for loans availed of by the units at high interest in the past will extend beyond five years as earlier announced by the government.

The modifications followed certain issues raised by the Indian Cotton Mills Federation (ICMF) on the contents of the package, said a textiles ministry release.

There is no change in the total amount of debt exposure which stands at Rs 6,000 crore against Rs 10,000 crore estimated earlier. The contraction of debts has been due to high interest at 15-16 per cent on loans earlier availed of by the units. Now, the repayment can be made at eight to 9 per cent interest. The differential is sought to be bridged by allowing banks to raise external commercial borrowings at lower interest for a period of five years only.

Further, the units have been given more time to achieve the stipulated debt equity ratio which has been left to be decided by the lender. While permitting banks/financial institutions to access ECBs and convert rupee term loans into foreign currency loans, the recipient units will pay interest at 8 to 9 per cent on rupee loan basis.

As per the scheme, healthy units which are paying dividends and are able to service their loans will be provided assistance under the technology upgradation fund scheme. The technical agencies to assess the viability of the units seeking assistance under the scheme may be decided by the textiles ministry.