Yarn Bank Scheme

The Ministry of Textiles launched the Yarn Bank Scheme to avoid yarn price fluctuation. This scheme is a component of the PowerTex India Scheme. Small weavers in decentralised power loom sectors did not have the capacity to purchase yarn in bulk from the open market due to high rates. They depended on the local suppliers of yarn for their everyday consumption. 

The local supplier sold yarn at a high rate and took advantage of fluctuations in price. Due to this, the small power loom weavers could not get yarn at reasonable prices and plan their production. Thus, the yarn bank was set up to assure the availability of yarn at reasonable rates to the weavers. The yarn banks help the power loom units to sustain the fluctuation in yarn prices.

Objectives of the Yarn Bank Scheme

• To provide interest-free corpus funds to Special Purpose Vehicle (SPV) or consortium to help them purchase yarn at wholesale rates and give yarn at a reasonable price to the small weavers.
• To avoid local supplier and middleman brokerage charges on the sale of yarn.

Duration of Yarn Bank Scheme

The Yarn Bank Scheme was in operation for three years since its launch, i.e. 1st April 2017 to 31st March 2020, since it was a component under the PowerTex India Scheme.

Financial assistance under the Yarn Bank Scheme

Under the Yarn Bank scheme, an interest-free corpus fund of up to Rs.2 crore was provided to the Special Purpose Vehicle (SPV) or consortium formed by power loom weavers to help them purchase yarn at wholesale rates and give the yarn at reasonable prices to the small weavers. 

Eligibility criteria under Yarn Bank Scheme

Special Purpose Vehicles (SPV) are eligible to receive financial assistance under the Yarn Bank Scheme. The SPV has to comply with the following conditions:

• SPV should be constituted as follows: 
  • As a registered cooperative society
  • As a trust 
  • As a company registered under the Companies Act, 1956/2013
  • As a firm established under the Limited Liability Partnership Act, 2008
• SPV should have a minimum of 11 members 
• Members should be master weavers, power loom weavers, cooperative societies or NGOs or private entrepreneurs working for the power loom sector

Implementation of the Yarn Bank Scheme

• The government provided interest-free corpus funds up to a maximum of Rs.2 crore per yarn bank to SPV or consortium. 
• The SPV had to arrange their own fund equal to the fund sanctioned by the Project Approval Committee (PAC) within 60 days of the date of sanction.
• The corpus fund provided by the government was released to the SPV against the bank guarantee for 25% of the government corpus share in favour of the Textile Commissioner, valid for a minimum of 3 years.
• The corpus fund for the yarn bank was to be utilised by the SPV to purchase and supply the yarn to the weavers and members of SPV in and around the cluster. 
• The SPV had to identify or provide a suitable warehouse for storing yarn with proper safety, documentation, security arrangements, and insurance. 
• The SPV had to rotate the corpus fund, including their contribution, at least four to five times a year. 
• After implementing a project, SPV had to furnish a monthly performance report to the respective Regional Office of the Textile Commissioner.
• The corpus fund would be available with SPV for three years. However, it could be extended by the PAC based on its performance.
• When the amount was not recovered from the bank guarantee or security for any reason, the SPV or consortium had to refund the amount with a simple interest of 10% effective from the expiry date of three years to the Government of India. 
• The Office of the Textile Commissioner implemented or monitored this scheme through Regional Offices in association with the state governments, Powerloom Development Export Promotion Council (PDEXCIL), power loom federations, associations, organisations, etc.