The All India Gems and Jewellery Domestic Council (AIGJDC) has urged lenders to ease the availability of finance to prevent the shutting down of small and medium enterprises (SMEs) in the sector.
Such units are having problems in getting working capital loans from banks, after the tightening of scrutiny since the Rs 130 billion PNB-Nirav Modi scam came to light a month before. Banks have started stringent third-party inspection, audit and evaluation of collateral jewellery stocks.
SMEs and smaller units, especially first-time borrowers, have been facing multiple hardships. Since such units are either wholly owned or partnership start-ups, they are having to mortgage assets worth twice the borrowing size.
“Lenders are seeking 100 per cent collateral and 100 per cent hypothecation of stock, which works out to 200 per cent of overall blockage of liquid assets. With SMEs and MSMEs are already working with a small capital base. With the norms turning stringent, they have a survival issue. We would like lenders to sanction loans up to Rs 500 million with only a small percentage of collateral for survival of these units,” said Nitin Khandelwal, chairman of the AIGJDC at an event here.
Business sentiment has been affected with the newly stringent inspections and audit from lenders. "SMEs and smaller units do not have the capacity to fly away from India and seek their asylum abroad. The entire industry should not be punished for the default of one or two players, that also concerned with export,” said Khandelwal.
Jewellers are expecting normal sales during the coming festival season, starting with Akshaya Tritiya on April 18, followed by the wedding season in May and June.
The jewellery industry in India employs an estimated 10 million people, directly and indirectly. Around 40 per cent are women.