The Indian gem and jewellery industry, hit hard by the global economic slowdown, has voiced concern over the increasing the duration of bank credit, interest rate subvention and support at branch level.
The government and the Reserve Bank of India had earlier announced a slew of measures such as increasing the working capital limit to units facing cash flow problems.
The industry body of the banking industry, Indian Banks’ Association (IBA), held discussions with the industry. “We have received feedback from the units, who face problems at the branch level and we are working out the solutions,” said a senior executive with a large public sector bank.
Reflecting a sharp drop in global demand, exports of jewellery from India fell by 2 per cent in the period between April 2008 and January 2009.
During the period, overseas sales dropped to $16.4 billion compared with $16.8 billion a year ago, according to data from the Gem & Jewellery Export Promotion Council.
The export of cut and polished diamonds fell 2.9 per cent to $11 billion, while import of rough diamonds declined 13 per cent to $7.08 billion in the 10 months.
Gold jewellery sales dropped by 6.1 per cent to $4.29 billion. In the year ended March 31, 2008, India exported gems and jewellery worth $21 billion.
The financial crisis has led to a liquidity crunch and delayed payments, with industry players finding it difficult to repay loans. Jewellery manufacturers have also sought an extension in the time limit for letters of credit (LC) needed for gold imports.
Bankers said jewellery units are facing payment difficulties but the extension of time limit is not across the board. Banks will study each case and decide on the extension on the basis of merits such as the payment cycle.
Rating agency Fitch said the industry has high collection periods of 120-180 days from the date of booking of revenues and they are mostly financed through export credit.
Source : Business Standard