Finance ministry officials told Business Standard that according to calculations made by the lenders, despite the Centre's budgetary contribution of over Rs 1,300 crore, banks and three financial institutions are estimated to take a hit of over Rs 750 crore.
According to NK Singh committee recommendations on the proposed Textiles Industry Reconstruction and Development Fund, banks will reduce interest rate on loans to eligible textiles companies to 11 per cent while in case of FI's the interest rate will be pegged at 12 per cent. The government will then chip in with its contribution to bring down the effective interest rate at 8 per cent.
Officials said, nationalised banks will take a hit of over Rs 200 crore as a result of interest reduction from the present level of 15-16 per cent to 11 per cent while the government will chip in with Rs 650 crore to bridge the interest gap of 3 per cent on loans extended by them.
Among the financial institutions, Industrial Development Bank of India is expected to take a hit of Rs 286 crore hit due to interest rate reduction, while IFCI Ltd and ICICI Bank are estimated to sacrifice over Rs 250 crore and around Rs 100 crore, respectively.
The government budgetary support to IDBI is estimated at around Rs 350 crore while IFCI and ICICI Bank will receive Rs 215 crore and Rs 50 crore, respectively, from the Centre.
The officials said that some lenders have also expressed reservations about the NK Singh committee's recommendation on reducing interest rate to 12 per cent since they had proposed 14 per cent.
The lenders have also raised eyebrows over conversion of the overdue interest into zero coupon debentures since they had proposed it to be turned into term loans, eligible to be covered under the fund, as it would affect their profitability.
Another concern relates to waiver of penal interest and liquidate damages, while institutions like IDBI had asked for converting it into interest free repayable after all repayment liabilities of banks and FIs are paid in accordance with the restructuring package.
