13 Aug 2012

Companies Requiring Debt Restructuring

The Assessment Report on Stress in the Textile Industry conducted by Bank of Baroda Capital Markets Ltd., identified 290 companies consisting of 157 cotton and cotton
yarn companies and 112 man-made fiber companies for debt-restructuring.  The study also estimated that a long term debt of Rs.27,111crores and working capital borrowings of Rs.7,500 crores was required to be re-scheduled. 
The Study Report was accepted by the Government, and forwarded to Reserve Bank of India (RBI) for consideration.  The Reserve Bank of India, in its response on June 29, 2012 has said 
(i) The case for asset classification benefit on second restructuring is not justified           
(ii) The concession sought on provisioning is not acceded to, as provisioning is the first defence against expected losses           
(iii) The RBI has expressed its ‘no objection’ to moratorium on repayment of principal amounts and conversion of working capital into Working Capital Term Loans repayable over a period of 3-5 years. 
In pursuance of RBI’s advise, Ministry of Finance has issued directions to Banks to create a special window for textile industry debt-restructuring on case by case basis. 
A Group of Officers has been constituted by Government to coordinate with Banks and Textile industry for restructuring of loans. 
This information was given by the Minister of State in the Ministry Of Textiles, SmtPanabaaka Lakshmi in a written reply in the Rajya Sabha today.

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