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Indian Govt. Signals Support For G&J Industry In Wake Of Bank Fraud

GJEPC Chairman Pramod Agarwal's projected image looms
over speakers during his opening remarks at the event.

Minister of Commerce & Industry and Civil Aviation Suresh Prabhu today clearly articulated the government’s support for the Indian gem and jewellery industry, indicating that this support would continue despite the recent near-$2 billion bank fraud that had rocked the country in February this year.

The Minister was speaking at a finance symposium titled Diamond & Jewellery Financing 2018 — Mitigating Risks Effectively organised by the Gem & Jewellery Export Promotion Council (which functions under the Ministry of Commerce), to bring industry, banks and government together to better understand each other in the wake of the scandal that had shaken the confidence of banks.

 The Minister said that generating both jobs and exports was vital to a growing economy like India, which needs both to fuel its development and growth. While his ministry’s mission was to seek new markets and product segments for Indian exports, the minister said that this did not mean he could ignore a sector with a tried and tested track record, which had huge scope to grow further, with the potential to generate millions of more jobs.

He added that while he wanted the industry to grow and would help it in this direction, he fully understood that concerns of the banks and said the way forward was in developing a system where the business and financial risks were fully understood by the banks, enabling them to lend within their established norms. He hoped that industry and banks would work out a practical way forward toward this.

Commerce Secretary Rita Teaotia, the highest-ranking bureaucrat in the Ministry, in charge of Commerce, echoed the supportive sentiment, noting that the very presence of the Minister, herself and Joint Secretary Manoj Dwivedi indicated that the government wanted the gem and jewellery sector to grow, generate employment and generate value.

The Commerce Secretary was appreciative of the measures taken by the GJEPC towards generating confidence in the industry and said that it now remained for the industry to prove that these measures were active measures and not just words.

GJEPC Chairman Pramod Agarwal, in his opening remarks, said the trade body has outlined a slew of measures to instil confidence in the industry. These were presented in a white paper at the symposium, along with an outline of the specific needs of the industry by GJEPC Banking, Insurance & Taxation Committee Convener Sanju Kothari.

These measures include:

  • A stock valuation committee appointed by the GJEPC that will be tasked with providing accurate diamond stock valuations of companies for banks to assess.
  • The setting up of a credit and risk investigation team.
  • Encouraging all diamond dealing firms to register themselves with an initiative known as the MyKYCBank and asking all banks to demand that their clients be registered.
  • The preparation of monthly or quarterly reports on key data points, observations and major developments in the industry, which would be made available to all stakeholders and banks.
  • An individual analysis by the GJEPC of data from genuine gem and jewellery exporters and importers, thus eliminating bogus companies.
  • The conducting of a half-yearly meeting with bankers to exchange critical information, understand and address any issues they had.

GJEPC Vice Chairman walked the symposium through the working of the MyKYCBank initiative. This is an initiative to address two major areas of concern for banks — compliance risk and the identification of genuine industry players.

Akin to a social security number for gem and jewellery companies — both buyers and sellers — with all the information that banks will find necessary to take credit risk decisions, the MyKYCBank initiative is headed by Pranay Narvekar (who has blogged on GEMKonnect on importance of compliance). During the symposium, the MyKYCBank signed a memorandum of understanding with the Antwerp World Diamond Council (AWDC), expanding the reach of the initiative to Antwerp as well. Chief Executive Ari Epstein signed on behalf of the AWDC.

State Bank of India Managing Director of Risk, IT & Subsidiaries Dinesh Khara, while appreciating the measures taken by the GJEPC, acknowledging that they went a considerable way towards addressing many of the concerns banks had, nevertheless said that trust would now have to be built up over time as these measures were ‘tested on the ground’ going forward. He noted that norms had changed and that simply being a Sightholder today did not mitigate some concerns banks had.

De Beers Executive Vice President for Sightholder Sales Paul Rowley noted that despite the imperatives of beneficiation, India is the heartbeat of the diamond processing industry and that given an overall optimistic outlook for the global industry, De Beers wanted to see the Indian industry grow with greater transparency and institutional confidence.

In a televised panel discussion on the issues moderated by CNBC-TV18 Executive Editor Latha Venkatesh a group of bankers shared their perspectives along with a group of diamond industry stakeholders. Manoj Dwivedi too participated in the discussion.

The banking panel had State Bank of India Deputy Managing Director P.N. Prasad, IndusInd Bank EVP - Head, Gems & Jewellery Bijayananda Pattanayak, Emirates NBD General Manager — Specialised Industries Group Wholesale Banking George Abraham and Central Bank of India Field General Manager Kamlesh Taneja.

The diamond industry was represented by Rosy Blue India Managing Director Russell Mehta, Dimexon Diamonds Managing Director Rajiv Mehta, Kiran Gems Managing Director Mavji Patel and Saunak Parikh of Mahendra Brothers Exports.

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