India Trade Looks to Ease Banks' Concerns

RAPAPORT... India's diamond industry is working toproduce guidelines for banks to reduce their risks when lending to the trade. The nation's Gem & Jewellery ExportPromotion Council (GJEPC) has been collaborating with the government and lenders tocreate a written policy, Colin Shah, vice chairman of the trade body, told RapaportNews. Representatives of the GJEPC willmeet with 30 banks on May 11 to address their concerns about continuing their financial support of the sector in the wake of the NiravModi scandal, Shah added. The organization will publish the document followingthat meeting. India's diamond trade has come under scrutinysince claims emerged in January that jewelry tycoon Modi and his uncle, MehulChoksi, managing director of Gitanjali Gems, had defrauded Punjab National Bankof $2 billion. Traders fear tighter credit terms following the alleged scam,with the State Bank of India already introducing stricter collateral conditionsshortly after the Modi investigation came to light. Financialinstitutions have several concerns about the sector, including the potentialdevaluation of companies' inventory, Shah explained. To that end, the GJEPCwill use the meeting to advocate for the industry, while discussing how lenderscan keep their risk level low, Shah explained. "We're trying tomake sure good [companies] continue to get funding, as well as mitigating thecosts to bankers," Shah said. The collaborationis the first time the GJEPC has worked together with banks to produce adocument of this type, Shah noted. Shah will representthe GJEPC at the meeting alongside Sanju Kothari of the GJEPC's banking,insurance and taxation sub-committee. Paul Rowley, executive vice president ofdiamond trading at De Beers, will give a presentation to bankers on downstreamdemand, and will explain the miner's financial-compliance standards. Suresh Prabhu,India's minister of commerce and industry, will also attend the meeting, Shahsaid.Image: Atstock Productions/Shutterstock