Diamond industry bats for SMEs
Updated: May 15, 2013 07:51:28pm
"Banks have taken a cautious approach towards financing big, small and medium diamond firms. The small firms are in the unorganized sector without any portfolio. Thus, we are setting up benchmark standards for the SMEs' corporatization. This will help the banks to assess the quality of lending to them," said GJEPC Chairman Vipul Shah.
President of Surat Diamond Association Dinesh Navadia echoed similar sentiments. "Banks are literally turning down loan applications of SMEs. If this continues then the small players will one day disappear. Out of over 3000-odd small and medium manufacturing units, hardly 0.5 per cent get bank finance," said a media report quoting him.
The Indian banking sector, according to the report, started to carry out due diligence for the asset quality of borrowers before sanctioning them fresh loans, after the economic slowdown in 2008 and non-performing assets (NPA) rising to Rs 2,500 crore, with leading Indian diamond companies failing to repay loans.
Further, while clients of leading mining companies like Rio Tinto, Alrosa and De Beers have to give collateral of 30 per cent, the percentage for small players is 100 per cent.
In 2009, the aggregate finance extended to diamond SMEs in Gujarat by four major commercial banks and SIDBI worked out to Rs 21 crore. Of this Rs 14 crore was taken by 46 units of Surat.
On the other hand, nearly 50 banks, it was reported, provide about USD four billion (Rs 22,000 crore) to leading diamond and jewellery companies in India and abroad.
"We are inviting all diamond associations from Gujarat to help us in organizing the small players. Small players are the base of the industry and they should get their pie in the bank loans," Shah said. (KNN)