New Delhi, May 12 (KNN) With a view to avoid any sort of potential frauds, Union Commerce and Industry Minister Suresh Prabhu has urged Banks to step up lending efforts to legitimate gems and jewellery players who are genuine, bankable and has a capability to scale up.

The decision to ban the issuance of letters of undertaking (LoUs) and letters of comfort (LoCs) by RBI, following the Rs 13,000-crore PNB scam involving Nirav Modi, has affected the Gems and Jewellery sector badly, as the sector is facing financial crunch since then.

Speaking on the need to have banking system which understands the gems and Jewellery industry and supports its growth without taking any undue risks, Prabhu said, “Gold, gems and jewellery and diamond give huge employment opportunities in India and thus we need to build a banking system that understands the business properly.”

“Banks should not take any undue risk, which are not understandable and quantifiable”, he added.

The Minister made the following remarks at an event organized by the Gems and Jewellery Export Promotion Council.

Further, he urged banks to have proper risk-mitigation mechanism in place to prevent any potential frauds.

He recommended banks to step up lending efforts to legitimate players fuelling the trade and should not hesitate to fund the industry efforts which are bonafide, transparent and above board.

With 3 million new jobs on the anvil, the sector is on growth spiral and has a potential in future, he added.

Government will not support any business activity which is not ethical and bankable, Prabu said, adding to this he said “we would like banks to fund everything which is genuine, bankable and has capability to scale up.”

On the PNB fraud, commerce secretary Rita Teaotia said there is need for introspection by banks and the gem and jewellery sector.

Blaming banking system for this failure to spot the scam, Teotia said “the banking sector must also recognize that the reason for this failure was actually failure of our own banking system.”

“There is no cosy relationship that anyone of us can afford. It has to be business and we have to follow prudent norms.”, she added.

In a white paper submitted by the GJEPC to the government, the council has demanded turnover coverage from the Export Credit Guarantee Corporation of India (ECGC) which was available till 2014 but was later sealed.

The council has asked the government to reinstate exposure under whole turnover post shipment (WTP) for banks.

Regarding this, Teotia said the government will not give any instruction to ECGC and will like the institution to take a call based on the merit and operate in a professional manner.

“ECGC need to take the risk on the sector, but it will not be at the direction of the government,” she said.

Suggesting banks to focus on SME sector which are facing funding issues, Commerce Secretary said “we are failing a very significant sector if we neglect the SMEs.” (KNN/YV)