India’s diamond industry is working to produce guidelines for banks to reduce their risks when lending to the trade.
The nation’s Gem & Jewellery Export Promotion Council (GJEPC) has been collaborating with the government and lenders to create a written policy, Colin Shah, vice chairman of the trade body, told Rapaport News.
Representatives of the GJEPC will meet with 30 banks on May 11 to address their concerns about continuing their financial support of the sector in the wake of the Nirav Modi scandal, Shah added. The organization will publish the document following that meeting.
India’s diamond trade has come under scrutiny since claims emerged in January that jewelry tycoon Modi and his uncle, Mehul Choksi, managing director of Gitanjali Gems, had defrauded Punjab National Bank of $2 billion. Traders fear tighter credit terms following the alleged scam, with the State Bank of India already introducing stricter collateral conditions shortly after the Modi investigation came to light.
Financial institutions have several concerns about the sector, including the potential devaluation of companies’ inventory, Shah explained. To that end, the GJEPC will use the meeting to advocate for the industry, while discussing how lenders can keep their risk level low, Shah explained.
“We’re trying to make sure good [companies] continue to get funding, as well as mitigating the costs to bankers,” Shah said.