Gems and jewellery sector to be in focus at Mumbai banking summit.

SURAT: With Indian and overseas banks taking a cautious approach to lending to diamond companies, including De Beers sightholders and clients of Alrosa and Rio Tinto due to rising number of loan defaults in Surat, Mumbai and Antwerp, the Gems and Jewellery Export Promotion Council (GJEPC) is taking a lead role in raising the issues of the gems and jewellery sector with Indian bankers and Government of India. The who's who of banking, gems and jewellery trade and the Union ministry of finance will be present at a diamond, gems and jewellery banking summit-2014 in Mumbai on June 28 being organized by GJEPC.

The summit is expected to focus on financing for the gems and jewellery sector, the current scenario of Export Credit Insurance for Banks (ECIB) and credit guarantee in gems and jewellery industry and other issues faced by the industry.

Banks across the world are taking a much more cautious approach to lending to diamond industry clients, with companies in India, Belgium and Israel complaining of increasingly tight credit conditions.

The State Bank of India has exposure to diamond and jewellery companies in India and abroad to the tune of $600 million.

Banks require from De Beers and Rio Tinto sightholders collateral of 25-30 per cent of the amount of loans extended, while for small players it is four times of this. As a result, lending to small firms has dried up, slashing their working capital.

"We have sought to set up a finance cluster for small and medium players in the industry, who are not getting bank finance," a Bank of Baroda official. "Talks are going on with the Reserve Bank of India and soon we will get a cluster in Surat."

The diamond companies in India, Antwerp and Dubai receive $15 billion worth of finance for the purchase of rough diamonds per annum. However, diamantaires, cutters, polishers and manufacturers are being squeezed as diamond miners demand more for rough stones.

"Recently, De Beers increased rough diamond prices by three to five per cent. This is putting a lot of pressure on the diamantaires and the market," a diamantaire said.

"Banks are not happy with the pricing of rough diamonds compared to polished prices and diamond jewellery. Most of the foreign banks like Antwerp Diamond Bank (ADB) and ABN Amro have reduced around 70 per cent of their lending for rough diamond purchase by diamantaires," a senior GJEPC office-bearer said.

Source : timesofindia.indiatimes.com