SBI Urges for Uniformity in Lending to Gems and Jewellery Sector

State Bank of India is pushing for bringing about uniformity in its lending practices to the gems and jewellery sector

Post By : IJ News Service On 13 March 2020 5:34 PM

State Bank of India is pushing for bringing about uniformity in its lending practices to the gems and jewellery sector, where lending growth has been adversely affected following incidence of frauds.

SBI was working on a policy framework to standardise lending practices to the gems and jewellery sector and was looking forward to extend it to other banks through Indian Banks’ Association. A low lending exposure to the sector was mainly because of a distrust created between lender and the borrower. While peak exposure to the sector never crossed Rs 25,000 crore, SBI has liberalised its lending policy to the sector after reviewing it every year.

Most banking experts have labelled this move to be highly risky, given the requirements of higher amounts of credit and inability to provide solemn securities in return for lending. In addition of prior defaulters from the industry who gave the community a bad name due to their ill-placed borrowings.

Banks are comfortable to lend when there are transparency in issues like ownership, professional management, valuation, ratings exposure to insurance, reporting structure, quality and transaction. Around 60 per cent -70 per cent of the gems and jewellery units have moved to corporate structure. SBI is persuading for a neutral, impartial valuation policy for diamonds, while it is also looking for the Export Credit Guarantee Corporation (ECGC) to finalise the new policy for insurance cover.

ECGC policy for insurance cover, especially to the exporting MSMEs, is in the final stage of approval and a guarantee of 80 per cent coverage of the exposure for exporters should put the banks at a comfortable zone. Banks were also looking for a credit guarantee scheme for the domestic players to be in a comfortable zone for lending, but lenders would be comfortable with both internal and external ratings.

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