India's apparel exporters have asked Reserve Bank of India (RBI) to undertake a string of measures to ease the working capital crunch faced by the industry in the wake of coronavirus outbreak.
In a letter to Shaktikanta Das, Governor, RBI, on March 16, the Apparel Export Promotion Council (AEPC) wanted the apex banker to facilitate faster clearance of banking and packing credit to the industry.
AEPC chairman, A Sakthivel said that the deeply integrated global value chain of the apparel sector has been impacted by disruptions in both exports and imports. Since orders are getting postponed by 3 to 6 months, the industry has sought an extension of the packing credit period for existing loans, upto a period of 360 days from the existing period of 270 days.
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"It is also expected and evident that the prevailing uncertainties will impact the order position as also the response time to meet the orders. Further, this is going to impact the working capital condition of the apparel exporters", Sakthivel pointed out. He wanted RBI to recognise the volatilities in the global apparel markets and order postponements/cancellations, and provide full support of the financial institution in managing financial viability of the apparel sector.
In order to pre-empt the liquidity challenges expected due to the adverse impact on export realisations and working capital, especially by the MSME sector, AEPC called for an extension of the bill realisation period from 9 months to one year.
They wanted banks to be allowed to delay declaring companies' accounts as non performing asset NPA for a minimum of 1 year 'as the lack of business coupled with fixed cost will make accounts as NPAs'.
Extension of the exemption period from caution listing of exporters by RBI from March 31, 2020 to March, 31, 2021 was another demand.
The AEPC letter also requested RBI to enhance the existing limits for advances of exporters by 25 per cent and implementation of collateral free lending upto Rs 2 crore. For lending beyond Rs 2 crore to the MSMEs, the exporters wanted a cap on the collateral requirement at 35-40%.
The apparel council also wanted the government to consider all apparel exporters for the 5 % Interest Equalization Scheme which is currently available only for MSME exporters. A two year extension of the Interest Equalization Scheme upto 31st March 2022 has also been sought.
India exported $16.2 billion worth of garments in 2018-19. The apparel sector contributes to 43% of India's textiles exports in value terms and enjoys 5 % share in the country's overall exports. Apparel sector is also the largest employment provider after agriculture and employs 129 lakh workers, 65-70% of which are women.
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