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Canara Bank rediscovers Tirupur knitwear sector

Our Bureau

COIMBATORE, Feb. 11

CANARA Bank will revive lending to the Tirupur knitwear sector by shedding past concerns on high non-performing asset (NPA) levels encountered by it in the region till a few years ago.

``We will aggressively lend again for Tirupur units because of the revival of the hosiery sector,'' the Canara Bank Chairman and Managing Director, Mr R.J. Kamath, said.

One of the reasons that had prompted Canara Bank to have a re-look at its lending was the modernisation drive pursued by Tirupur-based knitwear units, many of whom had gone in for high-value garment manufacture, he said.

What has made the bank shift gear on its risk perception about the knitwear centre is the likely investment flow into the region with the Centre dereserving the garment sector from the SSI ambit.

New investment on plant and machinery also holds promise as a number of exporters have sought to vertically integrate their production.

Canara Bank officials conceded that the NPA level that prevailed in Tirupur region was higher than the average. But this would not deter them from exploiting new lending opportunities in the region.

With high interest rate increasing the production cost, they pleaded for lower interest rate. They wanted the lending rate to be in consonance with Libor (London inter-bank exchange rate) to make the exports competitive.

According to Mr P. Ramamoorthy, General Manager, Canara Bank, the Textile Technology Upgradation Fund Scheme (TUFS) has opened up new avenues in project financing in the Tirupur region and Canara Bank has already provided Rs 30 crore under the scheme.

Mr S.R. Ponnusamy, Secretary, TEA, representing the exporters, said that the concessional interest rate for packing credit extended to the exporters were denied and clean rate of interest levied on exports done through third party shipments.

He said this was done even though the export bills were negotiated and foreign exchange realised in the same account through which packing credit was availed.

Mr Kamath, however, suggested declaring third party shipment at the time of taking the packing credit, and said exporters should give disclaimer to the effect. Otherwise, they should bear the higher interest on the credit, he added.

The exporters also sought lowering of interest on packing credit.

But, bank officials said that the rate being offered

currently was two per cent lower compared to the prime lending rate (PLR), and in any case, the lending rate was linked to the deposit rates which offered little leeway for the bankers to negotiate.