Rs 2,500cr dip in diamond funding in Q1 of FY’18 – Surat Today live News
Surat: In what is seen as a major impact of the multi-crore banking fraud with Punjab National Bank (PNB) involving billionaire Nirav Modi and Mehul Choksi, the banking finance in the gems and jewellery sector has reduced by almost 10% in the first quarter of 2018.
According to the Gems and Jewellery Export Promotion Council (GJEPC), the bank finance in gems and jewellery industry was to the tune of Rs 65,000 crore in 2017-18. In the first quarter of 2018, the bank finance reduced from Rs 15,000 crore to Rs 13,500 crore. It is expected that the overall bank finance in the industry per annum will reduce to Rs 6,000 crore in 2018-19.
The banks, according to GJEPC, have curtailed finance to traders and are demanding more collateral security and extensive documentation. The banks are also insisting that all customer invoices should be through the bank, which is hampering relationship with customers as well as cash flow on a daily basis. GJEPC officials said that it has urged the central government to intervene for the overall good of the industry.
Talking to TOI, GJEPC vice-chairman Colin Shah said, “The reduction in the banking finance in the gems and jewellery industry is worrisome. This will ultimately have a cascading impact on the overall export of gems and jewellery in 2018-19. The gems and jewellery contribute about 7% to the GDP and less finances means less contribution.” According to the data released by GJEPC, the export of gem and jewellery from India declined to 8.84% during April-June 2018 to $10.1 billion compared to $11.1 billion in the same period last year. GJEPC office-bearers said the council undertook proactive initiatives in the recent past such as MyKYC bank initiative, a “white paper” to mitigate the financing risks and boosting transparency into the credit mechanism playing a critical role in the trade.
GJEPC chairman Pramod Agarwal said, “The industry is witnessing a crisis of sorts as the banks have curtailed lending to traders and demanding collateral security and extensive documentation. In such a scenario, the gems and jewellery industry — a $ 41 billion export industry — will see a gradual decline in 2018-19. We are hoping that the government will intervene and bring some relief to the ailing industry that contributes 7% to the GDP. It is time to bring back interest subvention scheme for ease in doing business.” Agarwal added, “Banks have also taken away all the benefits on assessment fee due to which cost of finance has gone up. Post the recent bank fraud, banks and other financial institutions have become stringent and are insisting on a much higher collateral security against finance.”
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