GJEPC in talks with banks to free up credit for jewellery businesses

By

Isabelle Crossley

Published
Dec 6, 2018

The Gem and Jewellery Export Promotion Council (GJEPC) is in talks to negotiate lending norms of banks to India’s jewellery sector stating that more credit is needed but that the Nirav Modi scandal is not responsible for its decline.

On December 4, the GJEPC held a press conference in Kolkata to address its ongoing discussions with banks. The GJEPC asserted that the gem and jewellery trade is being adversely affected by a decrease in standby credit made available to the sector.

“Banks have definitely become cautious about lending to the sector but they have not stopped the credit flow,” said Sabyasachi Ray, the executive director of the GJEPC, at the press conference. “Banks are lending on a case-to-case basis. However, the standby credit which the bank managers used to release have dried up which is a matter of concern as rupee devaluation is impacting the working capital requirement of the trade. We are in talks with the banks and finance ministry to work out the lending norms to the gem and jewellery sector.” 

There exists an Rs 65,000 crore ($9.8 billion) sanctioned credit limit for India’s gem and jewellery sector with an Rs 57,000 crore useable limit. The GJEPC hopes that negotiations will make it easier for fine jewellery businesses to borrow money from banks.

There were fears that the ongoing fraud case that sees jewellers Nirav Modi and Mehul Choksi accused of one of the largest scale frauds in India’s banking history at the Punjab National Bank (PNB) could make banks distrust jewellery businesses. However, Ray maintains that this has not negatively impacted the industry and that it is the devaluation of the rupee and liquidity tightening at banks that has done this.

“The entire industry cannot suffer because of one or two fraudulent cases,” said Ray. “We have to make banks understand that not all exporters are violating rules and taking unscrupulous routes to get bank finance. SBI and IndusInd Bank are the two major lenders to the trade.”