LAHORE: Banks have started feeling the heat of the crisis-like situation in the textile sector, and have started ‘polite inquiries’ to assess the financial viability of certain textile units.
“Banks have started internal reviews to assess the magnitude of loss against their outstanding loans to the textile industry besides initiating unnoticed inquiries about the financial positions of certain mills,” said one senior banker from a recently privatised bank.
However, he added that that the severity of the situation has not reached the level of the 1992 crisis, when banks suffered heavily.

“We are receiving telephone calls from banks showing interest in the financial stability of certain units,” said a former official of the All Pakistan Textile Mills Association (APTMA).
According to him, the weaker units were likely to collapse soon. Sources said the banks which have extended long-term loans against machinery would suffer more.

But those banks which have restricted themselves to the working capital would be in a better position, as they are planning to curtail their limits immediately, added the sources. Besides, they added, majority of the limits are given against pledging cotton, therefore no big risk is involved in such financing, they said.
There is a general consensus among the bankers that units set up during last four years were highly vulnerable.

“We have learnt a lesson from the 1992 crisis when huge loans were stuck with the industry,” said an official from Allied Bank Ltd, adding: “The bank has adopted a very cautious approach over the last few years on extending long-term facilities to the industry.” - Internews

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