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Banking Issues Related To Challenges Faced By the Gem and Jewellery Sector

COVID-19 pandemic affected every aspect of life including businesses and various industrial sectors. The gem and jewelry sector too facing the wrath of COVID-19 storm. The world is facing unprecedented challenges due to the virus outbreak. In India, various relief measures have been announced to contain financial stress. Banks are implementing financial package and extending relief across the business. The banks are cooperating with the government to ensure uninterrupted banking activity throughout the country. COVID -19 loan extended to normal businesses including labor salaries, contractual job charge payment, vendor payment, and other statutory overheads, etc. The gem and jewelry industry has become vulnerable due to the no-availability of credit at a competitive rate and additional collateral demand by banks.

Post Pandemic Measures by Banks for Gem & Jewellery Sector

SBI has extended the metal gold loan period from 90 to 180 days. It is also considering to increase the working capital cycle besides simplifying the process of documentation. UBI has a relaxed given policy and higher finance. Moreover, banks are adopting the cash budgeting method and assessment of fund elongated WC cycle with a relaxed margin for PC/PSC to all clients. The assessment is based on cases and is subjected to supervisory review.

Interest Rate

Interest rates have been linked to MCLR. For term loan of 1-year, the MCLR rate will continue till 1 year. The revision will be done at 1 year as WC will be linked to 1 year MCLR. In the case of 90/180 days MCLR, the revision will be done accordingly. On an extended period of bills, the rate of interest applied will be discounted in rupee or dollar terms as per the original contract. The rate of discount would be the same in case of any extension as well. As the gem & jewellery industry needs flexible credit terms including dollarization of credit, gold card scheme, gold metal loans, and softer ROI & charges to survive international competition, SBI is working in tandem with IBA to bring uniformity in credit policies for diamonds and jewelry, etc. SBI urged RBI to extend the period of metal gold loan in the wake of extension in the receivable period.

The Demand for Gems & Jewellery Affected Due To Pandemic 

The demand for jewellery has significantly reduced because jewellery consuming nations like the USA and Europe are also affected by COVID-19. Hence permitted time for the realization of export has been increased from 9 months to 15 months and this is applicable up to 31.07.2020. The flexibility has been extended to the entire WC facility.

RBI Measures for Gems & Jewellery Sector 

RBI has permitted exporters with the dollarization facility. Though SBI has taken cognizance of the same, UBI is extending WC limits in dollar terms on case to case basis. Schemes such as NIRVIK for the sector are in progress. The gold card scheme benefits are being extended to eligible borrowers.

Digitization of Documents

The existing digital platforms need improvement for handling documents with required safety features. Though digital law and digital signature already exist. For instance, Ice Gate which is a secure platform to access bank portals but demand is made on the availability of the same on a real-time basis. DGFT working on a special digitization scheme to bring down human intervention or any lag in the system.

Government and Banks Focusing On Transparency and Accounting 

The government and banks focusing on end-to-end transparency and accounting to monitor the situation better and the gem and jewelry industry can play a positive role to enhance manufacturing, employment, and exports. The government is working out to bring private banks on board to provide credit to the gem and jewellery sector. In short, the bank is taking care of the sector’s credit needs.


Mines to Market
Mines to Market
Prashant Rathod


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