The Hindu : Debt recast plan proposed

Online edition of India's National Newspaper
Tuesday, Aug 12, 2003

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Debt recast plan proposed

By Our Special Correspondent

NEW DELHI AUG. 11. An expert committee on the restructuring of the debt portfolio of the textile industry has expressed the view that about Rs.10,000 crores of the total exposure of Rs. 16,000 crores of the financial institutions to the textile sector in the form of term loans could be restructured to revive the ailing textile units after assessing their debt servicing capacity.

The expert group, headed by the Planning Commission Member, N. K. Singh, presented its third report to the Union Finance Minister, Jaswant Singh, today.

The main recommendation of the group is for the constitution of a Debt Restructuring Fund and providing a mechnism to banks and financial institutions to restructure existing portfolios of the textile industry so as to reduce the rate of interest to around 8 per cent. As part of the restructuring exercise, institutions and banks are expected to reduce the rate of interest of their existing secured loans to a threshold level of 12 per cent per annum and an incentive of maximum 4 per cent would be extended through the proposed Debt Restructuring Fund.

It is also expected that banks and financial institutions would waive all penal interest and liquidated damages.

The restructured loans, along with interest, would be repaid in a maximum period of ten years, including a two year moratorium. The proposed scheme also covers foreign currency loans.

For profit making units, the group has suggested a ten year repayment period for fresh loans under the Technology Upgradation Fund Scheme (TUFS).

The group has estimated that the restructuring package would benefit about 350 textile units out of about a total of 500 textile units.

The Finance Minister, while presenting the budget this year, had announced a package for the textile industry and had also said that the Government was considering a mechanism for restructuring the debt portfolios for viable textile units so as to enable them to meet international competition. A separate package on assistance to accelerate the modernisation process of the powerloom sector is be announced shortly.

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