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New Delhi , Sept. 9

IN an attempt to revitalise the potentially viable textile units that are tending towards sickness, the Government on Tuesday announced a scheme that would permit banks and financial institutions to lend at 8-9 per cent per annum on their existing term loan exposure amounting to Rs 6,000 crore.

The loan exposure of Rs 6,000 crore was contracted prior to 1999 by integrated textile units at interest rates ranging between 15 per cent and 17 per cent.

The Secretary (Textiles), Mr S.B. Mohapatra, and the Secretary (Banking), Mr N.S. Sisodia, announced the salient features of the scheme at a press conference here.

As per the scheme, which would be effective September 15, banks and financial institutions would be permitted to access external commercial borrowings (ECBs) and convert rupee term loans into foreign currency loans. ECB by banks/ FIs would be permitted for five years. The entire scheme would have a five-year tenure. All accumulated liquidated damages and penal interest would be waived.

Mr Sisodia said that the accumulated interest liability would be frozen and converted into zero coupon bonds, payable after five years, in instalments, or at one time, as negotiated between the lender and the borrower.

He also said that the eligibility of units would be determined on certain parameters, which include post-restructuring debt servicing coverage ratio of at least 1:1.33. Further, units should have positive earning before interest, depreciation, tax and amortisation (EBIDTA) in three out of last five years. The technical viability will be assessed by the designated technical agencies.

Mr Sisodia made it clear that there would be no budgetary outgo for the Government on account of this scheme. He also clarified the policy makers in the Finance Ministry would factor in the current scheme while undertaking a review of the existing ECB policy.

As regards the general guidelines of the scheme, Mr Sisodia said that a personal guarantee by the promoters, as in steel, would be a pre-condition for the restructuring. Once the restructuring is completed, the RBI will consider classifying such restructured accounts as standard assets. Further, wilful defaulters would not be eligible for the scheme.

Mr Mohapatra said that healthy textile units that are paying dividends and are able to service their loans would be provided assistance under the technology upgradation fund scheme to become even more competitive.

According to the Secretary (Textiles), about 350 integrated units may become eligible for availing of the benefits of the scheme. The Finance Ministry would monitor the implementation of the scheme.

To induct technology in the decentralised powerloom sector, the TUF scheme has been enlarged for units wanting to take loans up to Rs 50 lakh.

"The direct subsidy under the scheme for such units would be increased from 12 per cent to 20 per cent. The sources of credit has also been increased by inclusion of genuine NBFCs", Mr Mohapatra said. The Government has in all committed Rs 260 crore to the decentralised powerloom industry. A new group insurance scheme for the powerloom sector has also been started.

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