Bank financing to India’s gem and jewellery sector has fallen at least 10% since April 1 due to stricter lending conditions, according to Rapaport.
Credit providers tightened their rules after alleged fraud by Nirav Modi. Financial institutions are requiring higher collateral levels.
Borrowers must give invoices to their bank, which sends the documents on to the buyer’s bank. Sellers only receive payment, and buyers only receive the goods, once both lenders have given their approval.
“The industry is witnessing a crisis of sorts, as the banks have curtailed lending to the traders, and [are] demanding collateral security and extensive documentation,” said GJEPC chairman Pramod Agrawal. “We are hoping that the government will intervene and bring some relief to the ailing industry that contributes 7% to [gross domestic product].”
India’s gem-and-jewellery exports is predicted to decline 10% in the fiscal year ending March 2019.
The GJEPC took measures to deal with the crisis, including launching a digital know-your-customer platform, MyKYC, and publishing a policy document outlining how the jewellery and banking industries can reduce risk.
Source: Rapaport
