The Gem and Jewellery Export Promotion Council (GJEPC), in association with leading Indian banks, has released a White Paper on Diamond & Jewellery Financing 2018. The occasion was the GJEPC’s banking summit on “Diamond & Jewellery Financing 2018: Mitigating Risks Effectively”, held on 11 May in Mumbai.

This timely publication addresses critical issues in banking that have implications on industry financing. They include assessment of credit limits, collateral security, related-party transactions, inventory valuation and subsidiary financing guidelines. These issues have come to the fore since the revelations about the alleged Nirav Modi–Mehul Choksi scams.

A key purpose of the white paper is to respond to widespread concern within and about the gems and jewellery industry in the aftermath of the scams, particularly regarding the new stringency in finance and compliance.

“Banks look at the performance of an individual company, and at its business model,” said Sanju Kothari, convenor, GJEPC, while presenting the white paper. He urged bankers not to apply a blanket policy to the entire industry. Instead, he said, to answer bankers’ concerns “A credit risk investigation team should be set up to gather intelligence from members of the trade. These insights can be used by bankers to take better-informed credit decisions.”

The industry is resolved to find a solution and regain the confidence of the financing community. “We, as an industry, promise to address the issues to the satisfaction of the banks,” said Pramod Agarwal, chairman, GJEPC. “In fact, we are the only industry in India to have created arbitration mediums with the banks and parties, in case of NPAs [non-performing assets], to achieve recoveries.”

In his address to the gathering Suresh Prabhu, union minister of commerce and industry, said that banks need to evaluate credit risk and only then provide finance. “On the one hand, banks need to finance projects which have economic value and create jobs,” he said, “and on the other hand, the bankers’ perspective is absolutely right, as they must take risks that are identifiable.”

The GJEPC’s banking summit was valuable in such a context, the minister said. “Over a period of time a proper system can be built to make banking safe, and that is why today’s event becomes really important. We are very keen to see the industry grow. I can see that, in the next three years, the industry can add 3 million jobs. Our exports can increase substantially. This is one business that has demonstrated its ability to compete globally.”

Under its self-regulation measures, said Agarwal, “the Council has initiated MyKYCBank.com, which will pave the way for a secured business in the future.” MyKYCBank.com is an online facility for companies to update their KYC information directly, where each legal entity gets a unique identity. MyKYCBank is a not-for-profit subsidiary of GJEPC, explained Colin Shah, vice president, GJEPC. “MyKYCBank addresses two key risks: compliance risk and identity risk. This facility creates unique IDs for genuine companies.”

Using the MyKYCBank system, Shah said, initial approval is granted online and final approval is given only after physical verification of the documents. MyKYCBank also tracks companies on the Reserve Bank of India’s (RBI) or other official watchlists, to ensure that those companies do not win approval. It is the only portal to carry all necessary information of the buyers as well as the sellers.

“It has 1,500 approved profiles already,” Shah said, “and 627 profiles are currently under process.” Participation in MyKYCBank is permitted only to companies that are members of an “approved industry body”.

“We, as banks, are very keen to fund economically viable projects,” said Dinesh Kumar Khara, managing director, State Bank of India, representing the banks at this summit. “The unfortunate event has shaken all of us, but all of us have learned a lesson. I am sure that the banks and the entire industry will come together and move forward.”

“I am glad that a beginning has been made, but these are early days,” said Rita Teaotia, commerce secretary, presenting the government’s point of view. “I think the introspection should go both ways. The banking sector should also recognise that it was a failure of the banking system. We all need to be professionals, as there are no cosy relationships that any of us can afford. It has to be business by following prudent norms.”

The NPAs of small and medium sector enterprises (SMEs), she added, are very low compared to those of big companies. “We are failing the SMEs by neglecting them, and I think our focus must go there.”

The commerce secretary’s final recommendation validated the GJEPC’s efforts and the summit: “I request the bankers to set up a committee consisting of bankers, financial institutions and the industry, which will meet to assess the recommendations of this white paper.”

News: Manoj Chakraborty – Retail Jeweller News Service

The Gem and Jewellery Export Promotion Council (GJEPC), in association with leading Indian banks, has released a White Paper on Diamond & Jewellery Financing 2018. The occasion was the GJEPC’s banking summit on “Diamond & Jewellery Financing 2018: Mitigating Risks Effectively”, held on 11 May in Mumbai.

This timely publication addresses critical issues in banking that have implications on industry financing. They include assessment of credit limits, collateral security, related-party transactions, inventory valuation and subsidiary financing guidelines. These issues have come to the fore since the revelations about the alleged Nirav Modi–Mehul Choksi scams.

A key purpose of the white paper is to respond to widespread concern within and about the gems and jewellery industry in the aftermath of the scams, particularly regarding the new stringency in finance and compliance.

“Banks look at the performance of an individual company, and at its business model,” said Sanju Kothari, convenor, GJEPC, while presenting the white paper. He urged bankers not to apply a blanket policy to the entire industry. Instead, he said, to answer bankers’ concerns “A credit risk investigation team should be set up to gather intelligence from members of the trade. These insights can be used by bankers to take better-informed credit decisions.”

The industry is resolved to find a solution and regain the confidence of the financing community. “We, as an industry, promise to address the issues to the satisfaction of the banks,” said Pramod Agarwal, chairman, GJEPC. “In fact, we are the only industry in India to have created arbitration mediums with the banks and parties, in case of NPAs [non-performing assets], to achieve recoveries.”

In his address to the gathering Suresh Prabhu, union minister of commerce and industry, said that banks need to evaluate credit risk and only then provide finance. “On the one hand, banks need to finance projects which have economic value and create jobs,” he said, “and on the other hand, the bankers’ perspective is absolutely right, as they must take risks that are identifiable.”

The GJEPC’s banking summit was valuable in such a context, the minister said. “Over a period of time a proper system can be built to make banking safe, and that is why today’s event becomes really important. We are very keen to see the industry grow. I can see that, in the next three years, the industry can add 3 million jobs. Our exports can increase substantially. This is one business that has demonstrated its ability to compete globally.”

Under its self-regulation measures, said Agarwal, “the Council has initiated MyKYCBank.com, which will pave the way for a secured business in the future.” MyKYCBank.com is an online facility for companies to update their KYC information directly, where each legal entity gets a unique identity. MyKYCBank is a not-for-profit subsidiary of GJEPC, explained Colin Shah, vice president, GJEPC. “MyKYCBank addresses two key risks: compliance risk and identity risk. This facility creates unique IDs for genuine companies.”

Using the MyKYCBank system, Shah said, initial approval is granted online and final approval is given only after physical verification of the documents. MyKYCBank also tracks companies on the Reserve Bank of India’s (RBI) or other official watchlists, to ensure that those companies do not win approval. It is the only portal to carry all necessary information of the buyers as well as the sellers.

“It has 1,500 approved profiles already,” Shah said, “and 627 profiles are currently under process.” Participation in MyKYCBank is permitted only to companies that are members of an “approved industry body”.

“We, as banks, are very keen to fund economically viable projects,” said Dinesh Kumar Khara, managing director, State Bank of India, representing the banks at this summit. “The unfortunate event has shaken all of us, but all of us have learned a lesson. I am sure that the banks and the entire industry will come together and move forward.”

“I am glad that a beginning has been made, but these are early days,” said Rita Teaotia, commerce secretary, presenting the government’s point of view. “I think the introspection should go both ways. The banking sector should also recognise that it was a failure of the banking system. We all need to be professionals, as there are no cosy relationships that any of us can afford. It has to be business by following prudent norms.”

The NPAs of small and medium sector enterprises (SMEs), she added, are very low compared to those of big companies. “We are failing the SMEs by neglecting them, and I think our focus must go there.”

The commerce secretary’s final recommendation validated the GJEPC’s efforts and the summit: “I request the bankers to set up a committee consisting of bankers, financial institutions and the industry, which will meet to assess the recommendations of this white paper.”

News: Manoj Chakraborty – Retail Jeweller News Service