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Banks mull uniform practices, valuers for gems and jewellery sector credit

A salesman arranges gold ornaments, on a display board, inside a jewellery showroom

MUMBAI:  Indian banks are working on a uniform set of practices of credit appraisal and disbursal of the gems and jewellery sector, which has seen risk aversion and stagnancy in credit offtake after a few cases of defaults and frauds.

Banks are also looking at appointing a common a set of valuers and auditors to provide pre-shipment credit to gems and jewellery exporters, a senior bank official said at Gem and Jewellery Export Promotion Council’s Banking Summit.

“Policy-level strengthening has happened post the crisis in the segment, but now banks are working together, and also through Indian Banks Association, to put in place uniform practice on margins, collateral security etc. We brought in a revised policy in August-September 2018, other banks also more or less have adopted the policy,” said PN Prasad, DMD, State Bank of India.

Uniform approach in policy level also includes due diligence on various stakeholders, a list of approved auditors and valuers who can value the inventory and help banks monitor their exposure. Having a set of valuers and auditors would also help the banks finance at pre-shipment stage as most of the financing is now at post-shipment stage.

“When you finance the inventory, you need the valuations. Now there is a set of approved valuers who have been valuing the inventory for customs, we have been engaging them to give us the valuations. So, there is a group of valuers, and auditors the committee will finalise,” Prasad said.

SBI’s exposure to the industry globally has been stagnant at around Rs 25,000 crore. Overall bank credit has also been stagnant at around Rs 67,000 crore approximately.