Banks Reducing Credit to Indian Jewelry Firms over Default Fears
January 18, 15
(IDEX Online News) – Such is the fear defaults that Indian banks, among them Standard Chartered, State Bank of India (SBI), IDBI Bank Ltd and ABN Amro, are continuing to reduce credit levels to jewelry firms in the country, according to a report from Reuters.
The article quoted an un-named head of a state-run bank who said that defaults by Winsome Diamonds and Jewelry, and its affiliate Forever Precious Diamond and Jewellery had prompted banks to act more cautiously. The diamond company defaulted on Rs 6,000 crore ($970 million) owed to creditors in 2013.
"Generally the banking sector is going very selectively on gems and jewelry. Winsome and Forever had beaten us badly," the bank head told the news outlet.
"Banks have classified gems and jewelry into the high-risk category," said Bachhraj Bamalwa, director of the All-India Gem and Jewellery Trade Federation, adding that the industry was already paying higher interest rates than other sectors.
In a bid to bring much needed cash back into the industry, Reuters reported that jewelry industry executives are meeting with Finance Ministry officials on Tuesday.
According to the article, lending by commercial banks to the gem and jewelry sector increased just 1.2 percent, compared with 10.2 percent in other industries