Team Siliconindia

• India mulls textile-specific credit rating system to improve loan access and address sector-specific challenges faced by MSMEs.
• Industry stakeholders flagged issues like long payment cycles, job work culture, and poor understanding by banks, urging better-aligned financing tools.
• Textile Ministry explores creation of cluster-level credit facilitation centres and a unified 'Green Fund' to streamline sustainable investment and credit support.

India is considering introducing a credit rating system based on textiles to help better comprehend the financial health of textile firms and provide them better access to bank and other financial institution loans. Neelam Shami Rao, Secretary, Ministry of Textiles, has appealed to those in the textile industry to arrive at a textile-sepcific credit rating protocol. The idea was floated at a brainstorming session on 'Credit Access Issues in the Textile Sector' last week.

The meeting, presided over by the Textile Secretary, was meant to discuss possible solutions in consultation with industry, finance community, and policy-making stakeholders.

The Textile Ministry has undertaken an in-depth analysis of the problem of credit availability facing the textile industry, especially MSMEs. A comprehensive note detailing these issues and solutions recommended has been submitted, summarizing key problems reiterated on a regular basis by the industry.

The session was conducted by the Confederation of Indian Textile Industry (CITI). Industry members pointed out the challenges encountered in obtaining working capital, pointing out that the unique nature of the textile industry is at times poorly understood by banks. Concerns like long payment cycles, job work culture, and other industry-specific complexities were identified as areas where financial institutions need to have a greater understanding to enhance credit availability.

One major deterrent has been the prevailing risk perception of the textile sector in current credit rating systems. This explains the necessity for a specialized, textile-specific credit rating system.

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It was reported that there are already distinct funds that can be utilized to finance sustainable production energy efficiency and water management funds, for example. Yet stakeholders recommended grouping them into one 'Green Fund' to rationalize investment assistance in the textile industry. Industry players have been urged to submit their recommendations on this proposal.

The MSME Department runs the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. Yet the sector indicated difficulties in accessing the fund, which led to poor utilisation by textile MSMEs. It was thus advised that disbursements under this fund be closely tracked to make it more efficient and relevant to the textile industry.

Finally, awareness and procedural barriers to credit schemes were recognized. In response, the creation of cluster-level credit facilitation centres was suggested.