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India Tackles Financing Issues Affecting Gems and Jewelry Industry
Jul 2, 2014 2:40 PM
By Zainab Morbiwala
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RAPAPORT... In an effort to boost the morale of the Indian gems and jewelry industry, Dr. Gurdial Singh Sandhu, the secretary of financial services for India's Ministry of Finance, shared the following news during the Diamond, Gem and Jewellery Banking Summit, 2014: “Export is a priority sector for the government of India and necessary steps will be taken by the government to ensure its growth in the international market.”
This news addressed worries regarding the various taxes burdening the industry. Hosted by the Gems & Jewellery Export Promotion Council (GJEPC), the summit was organized in Mumbai and attended by members of the Ministry of Finance, leading banks, the council itself and members of the industry, with a strong media presence. Vipul Shah, the chairman of the GJEPC, explained that through the summit, the council wanted to bring together all the concerned parties to discuss the current financing issues faced by the sector.
Sharing some strong advice, Arundhati Bhattacharaya, the chairman of the State Bank of India (SBI), reminded the industry of the need to maintain the "three Cs" – confidence, corporatization and collateralization – to help strengthen its performance and bring it up to par with the international market. Her emphasis on the need for transparency in business operations and compliance maintenance within the context of the banking industry’s changing national and international markets was reiterated by S.S. Numdra, the chairman of the Bank of Baroda, a leading bank that provides financing to players from the gems and jewelry industry.
During the summit, there was also an elaborate discussion of the issue of The Export Credit Guarantee Corporation of India Ltd.’s (ECGC) refusal to carry forward ECIB policies for enhanced credit limits. Members from all sectors were unanimous in the belief that this would significantly hinder export growth, though there was general disagreement on who will take the risk ultimately – the banks or the ECGC. Members from the industry have been of the opinion that, whereas banks cannot outsource their due diligence obligations and mitigate risks by only adopting ECGC policies on export turnovers, the ECGC should have adequate paid-up capital from the government to provide requisite cover to the high-value gem and jewelry industry.
Citing the ECGC’s reservations on enacting policies for enhanced credit limits, however, N. Shankar, the chief managing director, stated that the corporation needs to limit its exposure to a particular industry and also cannot provide coverage at a face value sanctioned by the banks. Having said that, Shankar then added some positivity to the proceedings when he promised to take up the issue of increasing capital and deducting the exposure limit from 50 percent to 40 percent, which would further ensure growth in the industry. The decision to introduce a multi-buyer policy was also well received by the industry.
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Tags:
exports, GJEPC, India, Sandhu, taxes, Zainab Morbiwala
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