RBI panel to the rescue of diamond units

The Reserve Bank of India’s task force on the diamond industry has asked banks to examine the possibility of providing loans to distressed units against the inventory of polished diamonds. Such assistance is expected to provide liquidity support to units that are badly hit by the global slowdown in demand, and cash flow problems.

The diamond industry in Gujarat accounts for 72 per cent of the world’s processed diamonds and 80 per cent of India’s exports.  There has been a drastic fall in export orders from the US and European countries.
 

MORE NEEDED Finance to small and micro diamond units
Name	Units	Amt (Rs cr)
BoB	9	0.79
BoI	27	2.69
SBI	32	2.25
Dena Bank	4	12.18
Sidbi	13	3.17
Total	85	21.09

RBI had set up the task force last month to look into the problems faced by the diamond industry in Gujarat. The panel has proposed a slew of steps to mitigate the difficulties faced by the units and workers. The proposals of units, which enjoy credit facilities, should be put on fast track for restructuring, it said.

The panel also said banks could consider proposals to give credit to new diamond sector enterprises. Such assistance would help generate employment opportunities too, the task force pointed out, adding that banks might even look at financing procurement of rough diamonds from reputed agencies for cutting and polishing to maximise employment of workers. Banks will also take suitable measures to expeditiously release the benefits of restructuring.

Referring to the problems faced by workers rendered jobless, the panel said that banks could consider extending soft loans with elongated repayment cycles. For this, banks should seek identification by their employers. The diamond sector units would need to sponsor such workers to banks.

Banks could also consider rescheduling of existing housing, educational and personal loans of diamond workers on a case to case basis, the panel said, adding that banks could even provide small monetary limits for workers through General Credit Cards (GCCs).

As a long-term step to ensure a better skill profile for workers to get jobs, the RBI’s task force suggested that district administrations should organise training programmes that included re-training, re-skilling and rehabilitation of displaced diamond workers. Such preparation would help them seek alternative employment.

The district authorities should identify and sponsor all eligible workers for appropriate financial assistance and loans under various government schemes, the panel said in its report submitted to RBI yesterday.

It also recommended the formation of an education fund to help in payment of school fees of children of displaced diamond sector workers.

The industry is dependent on foreign countries for raw materials such as rough diamonds which  are imported by traders. These rough diamonds pass through a few layers before reaching the cutting and polishing units.

As these units undertake only cutting and polishing work, they are not involved in any purchase or sale in their dealing with the suppliers of diamonds. These units are, generally, not registered. Very few diamond cutting and polishing units have availed of bank finance.