SDA, GJEPC to approach Centre over term loan issue

retailj
By retailj April 13, 2018 03:22

The Surat Diamond Association (SDA) and the Gems and Jewellery Export Promotion Council (GJEPC) will be approaching finance ministry, Government of India, with a detailed representation on public sector banks denying term loans to small and medium units (SMEs) in the diamond sector.

Office-bearers of SDA and GJEPC stated that many small and medium units are facing difficulties in getting finance from public sector banks under Prime Minister Mudra Yojana (PMMY) and other bankable government schemes. There have been plenty of cases in the recent past where public sector banks have denied term loans to the tune of Rs 10 lakh to the diamond unit owners from Surat.

Following the sensational scam with the Punjab National Bank (PNB) masterminded by billionaire Nirav Modi and Mehul Choksi, public and private sector banks have squeezed financing to diamond industry. Moreover, bank branches across the country have been intimated not to process fresh letters of content (LOCs) and letters of undertakings (LoUs).

The industry requires more funds to address its working capital needs instead of investment in plant and machinery. In the recent past, it has been observed that banks offer financial assistance to big units with large amounts and in case of default, they suffer huge losses.

GJEPC regional chairman Dinesh Navadiya said, “A senior officer in New Delhi has guided us to directly approach the Union finance ministry over term loan issue to MSME units in diamond industry. We are preparing a detailed representation as to why the ministry of micro, small and medium enterprises (MSMEs) require capital, denial by the banks and other issues. In most of the cases, the banks have been asking for 50 per cent collateral in disbursing term loan amount. Suppose, a diamond unit owner wants loan of Rs 10 lakh, he has to deposit collateral of Rs 5 lakh.”

SDA president Babu Gujarati said, “Without the support of the Indian banking system, the MSME sector will not be able to survive. When there are provisions for term loan under PMMY, still the banks are not interested in sanctioning loans to diamond unit owner. This is clear violation of PMMY. We want central government to instruct public and private sector banks to lend MSME unit owners under PMMY.”

Story: Times of India

retailj
By retailj April 13, 2018 03:22
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