Since the $2-billion Punjab National Bank scam was discovered last year, the entire gems and jewellery
sector has faced a massive liquidity crunch, as banks have put it on a negative list. Proposals for new loans are being put on the backburner and provisioning and disbursement for existing customers have been cut extensively.
The global economic slowdown has also dampened overall sentiment, leading to a 15 per cent decline in exports for the sector in the April-June period.
ECGC will help ease credit squeeze for gems and jewellery
sector, said Prasad.
The government discontinued ECGC benefit to the gems and jewellery sector six years ago because of cases of intentional default of payment against exported consignments.
“For ECGC to succeed, the number of claims should come down. In the last few years, number of claims has shot up sharply. So, the success of ECGC is a matter of concern,” said V G Kannan, chief executive, Indian Banking Association (IBA).
Informed sources said the government has allotted ~1,000 crore for the entire exports-oriented sector. But, one jeweller has claimed default of ~10,000 crore, which raises questions over the credentials of the claimant and transparency in this sector.
Experts, however, have suggested putting an upward limit on the ECGC claim of ~100 crore to cover micro, small and medium enterprises sector also under this benefit scheme.
Pramod Agrawal, chairman, Gems and Jewellery Export
Promotion Council (GJEPC), however, felt the need to increase limit of dollar finance which has squeezed due to depreciation of the rupee over the last few years.
“In this decade, the rupee has depreciated 75 per cent to trade currently at ~70. But, the overall banking exposure to the gems and jewellery sector has marginally increased to about $9.5 billion in 2019 versus $8.5 billion in 2009. This has squeezed overall credit availability for gems and jewellery sector. Credit availability, however, remains crucial to achieve $75 billion of export target by 2022 as envisaged by the Prime Minister Narendra Modi,” said Agrawal.
Currently, India’s overall gems and jewellery export
is valued at around $33 billion.