The Reserve Bank of India (RBI) has formed a task force to find out ways and means to induce more credit in the diamond industry, which is reeling under severe liquidity crisis. RBI has included SDA in the task force comprising top level officers from Dena Bank, Bank of Baroda and State Bank of India. The association will provide key inputs to the task force for increasing credit flow in the industry. "The exposure of the bank credit in the small and medium units would be around Rs 100 crore in Surat.
The Surat Diamond Association (SDA) has been demanding extension of bank loan facilities to the small and medium diamantaires city, who are the worst affected due to lack of access of finance.
Few months ago, around 19 leading public sector and private banks of the country were invited at the meeting organised jointly by SDA and the Southern Gujarat Chamber of Commerce and Industry (SGto find out ways to finance these units.
Ninety-five per cent of the rough diamonds imported in the country are cut and polished in Surat and about 40 per cent of the polished diamonds are exported.
Out of the 3,500 diamond cutting and polishing units, 70 per cent are small and medium units while the rest are big diamond companies having the annual turnover above Rs 100 crore.
Dinesh Navadia, president of SDA said "After global economic downturn in 2008, these units are in dire need of finance as the rough diamond prices have almost doubled. While big diamond companies enjoy bank finance, it is the small and medium firms, which have to depend on the finance taken from other sources paying higher interest rates. It is a welcome move from RBI for setting up task force to look into the financing of the small and medium firms."
A senior official of SBI said, "We are ready to set up a dedicated diamond branch to cater to the small and medium firms but the industry association needs to take up the responsibility of verifying the MSME registration. Also, the small and medium firms need to get their export-import accounts, balance sheets and related documents ready in order to avail speedy loans."
The small diamantaires have been dealing in cash when it comes to payment of rough diamonds to the traders. Since the banks are not giving loan facilities to the small firms, the diamantaires have to depend on the finance provided by the big companies at hefty rate of interest of 10-15 per cent.
"Big diamond companies circulate money on interest which is quite high and the small firm owners have no other option at present," said Chandu Sheta, a small diamantaire. Kirti Shah, another diamantiare, said "If the bank finance is made available to us then we would be able to double up our business."