MUMBAI: Commerce and industry minister Suresh Prabhu on Friday said that there was a need to have a banking system which understands the gems and jewellery sector and supports its growth, without taking any undue risk. Speaking at an event organised by the Gems and Jewellery Export Promotion Council (GJEPC), the minister urged banks to have proper risk-mitigation mechanisms in place to avoid any potential frauds.
The sector is currently facing a severe funding crunch after the Reserve Bank banned the issuance of letters of undertaking (LoUs) and letters of comfort (LoCs) in March following the discovery of the Rs 13,000-crore plus Nirav Modi and Mehul Choksi scam. “Gold, gems and jewellery and diamond give huge employment opportunities in India. We would like to have a banking system that understands the business properly. Banks should not take any undue risk which are not understandable and quantifiable,” Prabhu said He also went on to point out that the government will not support any business activity which is not ethical and bankable.
“We would like banks to fund everything which is genuine, bankable and has capability to scale up,” he said. Raising the concerns faced by the sector, the GJEPC has submitted a white paper to the government where it demands turnover coverage from the Export Credit Guarantee Corporation of India (ECGC). The cover from ECGC was available until 2014, but was later sealed. The council has asked the government to reinstate exposure under whole turnover post shipment (WTP) for banks. Meanwhile, Pramod Agarwal, Chairman GJEPC said, “We, as an industry, promise to address the issues to the satisfaction of the banks. In fact this is the only industry in India who has created arbitration mediums with the banks and parties in case of NPA to achieve recoveries”.
The jewellers also pointed out that the unavailability of fund is also affecting India’s position in the international market. India’s gems and jewellery exports fell by 5 per cent in 2017-18 to $40-97 billion, mainly because of credit crunch and GST glitches. Commerce secretary Rita Teaotia said the government will not give any instruction to ECGC and will like the institution to take a call based on the merit.