State Bank of India
(SBI), country’s largest lender, on Friday said the cost of funding to the gems and jewellery sector will remain high as long as the industry is seen risky in view of the recent fraud by diamantaire Nirav Modi’s firms.
SBI managing director Dinesh Kumar Khara, speaking at a seminar organised by Gem and Jewellery Export Promotion Council (GJEPC) here, said as a lender it appreciates the initiatives taken by the council to mitigate concerns of the banks.
The cost of borrowing for the industry has gone up in the last few months which in nothing but direct risk-and-reward relationship at which banks
do the pricing, Khara said. The more important aspect is the perception of risk which has a bearing of past experience, he said.
SBI has a total exposure of over Rs 70 billion to the sector out of total Rs 700 billion held by all lenders cumulatively.
Khara said SBI is looking to be a part of a committee that is being set up with an objective to restore business confidence in this industry.
Speaking at the seminar, Union Commerce Secretary Rita Teaotia said: “Self-discipline needs to be maintained by the gems and jewellery industry with better sharing of information.
While the industry claims to have just 1 per cent of the non-performing assets (NPAs) of the entire banking system, one default has shaken the entire industry resulting into massive loss to lenders. More than the industry, the recent scam (PNB-Nirav Modi) is a failure of our own banking system.”
While the industry claims to have no impact so far of the scam on its credit limit for the financial year 2018-19, industry watchers anticipate a blow to the industry in the future.
Union Minister of Commerce and Industry Suresh Prabhu, speaking at the seminar, denied support to unethical and illegal business, but at the same time promised support to genuine business for rapid growth of the gems and jewellery sector.