Exporters Heave a Sigh of Relief, GJEPC Convinces SBI of the Need to Dollarize Working Capital Limits

It may come as a huge relief for the Gems and jewellery exporters, as GJEPC has been able to convince State Bank of India (SBI), the largest financier to the sector, that the working capital limits will be dollar-based. Colin Shah, Vice-Chairman of the Gem & Jewellery Export Promotion Council as quoted in a Business Standard report, says, “Dollarisation of limits insulates exporters from foreign exchange fluctuations. The real impact would be felt when banks reviewed the limits at the start of the next financial year (it begins April 1).”

Ever since the Nirav Modi scam came to the light, banks have tightened their financing to the sector. Banks have choked up the standby credit to the gems and jewellery sector, which have hurt exports. Banks had for long tried fixing the working capital for diamond and jewellery exporters in rupee.

Commenting on the current challenges the industry is facing with rupee limits, Sanjeev Agarwal, FICCI Gems & Jewellers said, “When the dollar increases and the rupee declines, then you are able to buy less for that amount because the credit gets reduced. For example, in the last one year, the rupee has depreciated by 12 percent, so for a person who is dealing in import and export in US dollar, the limit comes down by 12 percent.”

Adding further, Agarwal said, “The dollar limit has been given by banks since the last 15 years, the facility is there, but banks sometimes hesitate in giving it because they might perceive it as a higher risk. There can be several reasons behind it, they may not have dollar inflow or their priority is giving dollars to some other sector. SBI has agreed to give higher amounts in dollars to exporters—which means some stability and less pressure on their working capital. This will primarily benefit the export and the import of the industry.”

Courtesy: Retail Jeweller India News Service