Senior finance and textiles ministry officials will on July 22 evening meet managing directors of all major public sector banks to ease credit access to the textile sector, sources have told Moneycontrol.
Finance and textiles secretaries will talk to MDs of State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BoB) and other state-owned lenders on resolving structural hurdles in credit flow, improving working capital availability and advancing sector-specific lending frameworks, sources said.
The Centre is looking to make regulatory tweaks and incentive-based mechanisms to encourage banks to lend more to the textile sector, particularly micro, small, and medium enterprises (MSMEs), as part of a broader push to de-risk credit disbursal and unlock capital flows into the labour-intensive and export-driven industry, they said.
The textile and apparel sector is one of the largest contributors to India’s economy, accounting for around 2 percent of GDP. It is also the second-largest employer after agriculture, providing direct and indirect employment. With its strong backward and forward linkages, the sector plays a pivotal role in rural development and women’s workforce participation.
With the government targeting to triple textile exports to Rs 9 lakh crore by 2030, improving credit access to MSMEs is seen as critical for employment generation, manufacturing competitiveness, and export resilience.
“There is a need for a sector-specific approach. A key issue is the absence of credit instruments tailored to the seasonal and export-centric nature of textile operations,” Mukesh Kansal, chairman of textile firm CTA Apparels, told Moneycontrol.
Despite being categorised as a priority sector, interest rates remain relatively high. Procedural complexities, cumbersome documentation and delayed disbursal of subsidies, especially under schemes such as the Technology Upgradation Fund Scheme (TUFS) continue to hamper liquidity, he added.
TUFS is a capital subsidy programme to support the modernisation and global competitiveness of India’s textile and garment industry.
MSME credit flow
Among the proposals under consideration is the rollout of a textile-specific credit rating framework, akin to CIBIL, to help banks better assess the operational risks unique to textile units.
A common green fund is also being explored to consolidate sustainability-linked financing streams and support investments in energy-efficient, water-saving technologies —- a growing necessity as global buyers tighten environmental compliance norms, the sources said.
Industry bodies have flagged these issues in consultations with the finance and textiles ministries. They have recommended easing norms under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), providing interest subvention for working capital and export finance, and ensuring timely TUFS subsidy reimbursements among others.
Credit bottlenecks
Given the fragmented and informal nature of the sector, particularly in powerloom clusters and small processing units, banks often view textile MSMEs as high-risk borrowers.
Delayed payments from domestic and overseas buyers add to the chronic liquidity issue, with mismatches between receivables and inventory cycles exacerbating working capital gaps. This has led to cautious, risk-averse lending across much of the sector.
“We need a paradigm shift toward simplified, timely, and cost-effective credit delivery mechanisms,” Kansal said. “MSMEs are vital to India’s textile economy, and their growth is directly linked to ease of credit availability. The government must focus on ensuring last-mile credit delivery, improving transparency in subsidy mechanisms, and facilitating access to need-based financing.”
The sector also struggles with the absence of robust know your customer (KYC) systems and limited trade transparency, which heighten lenders' risk perception. Despite being part of the priority sector lending mandate, many textile MSMEs struggle to secure affordable loans.
“The challenges have been long-standing and systemic. MSMEs, which form the backbone of this sector, often struggle with stringent collateral requirements that are difficult for small units to fulfil,” Kansal said.
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