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Banks cut exposure to jewellery trade sharply

Industry lobby blames PNB scam for reduced exposure; seeks govt help to ease credit flow.

Mumbai: Axis BankNSE 0.45 % and Yes BankNSE -0.99 % are among India’s large high-street lenders that have reduced their exposure to the gems and jewellery sector, leading jewellery retailers said, with the latest central bank data pointing to a 6 per cent contraction in outstanding advances over the past year. Banking exposure dropped ₹4,400 crore to ₹65,700 crore over the year through May 24, 2019, the latest data issued by the Reserve Bank of India (RBI) showed.

“Many banks have cut exposure to the industry due to the sins of large players, rather than retail jewellers who have provided 100 per cent collateral to avail of credit,” said Shankar Sen, CMD, Senco Gold, which has 104 stores countrywide.

Sen, who doubles up as vice chairman of trade body All India Gem & Jewellery Domestic Council (GJC), added that Axis Bank and Yes Bank were among those that had cut their exposure “sharply.” Anantha Padmanaban, MD, NAC Jewellers, confirmed the two banks were among several PSU and private lenders that were in certain cases “not giving fresh credit or cutting existing credit to those in the gem and jewellery sector.”

Yes Bank’s exposure to the gems and jewellery sector as part of its overall exposure was down from 1.3 per cent in Dec 2018 to 1.2 per cent in March 2019, according to a bank official. Axis Bank did not immediately respond to an ET query on its reduced exposure to the sector.

Padmanaban attributed the decline in credit to the sector on the PNB scam that surfaced in February last year. Nirav Modi and his uncle Mehul Choksi allegedly defrauded PNB to the tune of about $2 billion. Sen said that GJC would meet the financeNSE 2.34 % ministry after the July 5 Budget to apprise them of the industry’s woes and discuss “ways” that would ease credit flow to the trade.

“The banks need to look at companies on a case-by-case basis rather than viewing the whole sector with trepidation because of the misdeeds of a few,” Sen added.

The two GJC officials spoke on the sidelines of a press meet to highlight their wish-list for the Budget. One of the GJC suggestions was to allow jewellers to be collection points for gold deposits under the Gold Monetisation Scheme (GMS).

Jewellers, GJC suggested, should be allowed to use the deposited gold under GMS as metal loans from banks in proportion to the quantity assigned to them. This could be monitored by the banks and the interest and principal payable to customers should be in the form of gold. The banks could earn their interest accrued from the metal loan, and the GMS would also succeed in harnessing household gold.

Courtesy - ET



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