Banks plan uniform lending policy in jewellery sector

SBI’s total global exposure to the industry is Rs 25,000 crore and the size of this portfolio has remained unchanged from the previous year.

Banks led by State Bank of India (SBI) are working on a common policy framework for lending to the gems and jewellery sector, a senior executive said here. The uniform policy will define terms of entry, such as credit rating, the system’s exposure to the borrower and the experience the latter has.

PN Prasad, deputy managing director, SBI, and the head of the co-ordinating committee for the framework, said: “We have put (in place) certain uniform practices in terms of entry barriers, in terms of collateral, in terms of margins, in terms of direct exposure. These will enable a uniform approach in proposals.” He was speaking on the sidelines of an industry event.

SBI’s total global exposure to the industry is Rs 25,000 crore and the size of this portfolio has remained unchanged from the previous year. Prasad said that the industry is seeing negative growth because of international factors, such as a slowdown in China.

Prasad explained that at present, all banks have their own lending policies. In addition, some banks have individual policies for the gems and jewellery industry. “SBI has had this policy for a long time now. We have been engaging with the industry,” said, adding: “We brought out this policy sometime in August-September 2018 and that has been circulated to all the other banks also through the IBA (Indian Banks’ Association). Other banks have also more or less adopted the policy.”

As a result of some issues specific to the sector, credit has remained more or less stagnant over the last few years, Prasad said. Lenders are now trying to achieve a policy-level uniform approach so that the policy is strengthened. The due diligence of the various stakeholders has been carried out through a know your customer (KYC) platform. Also, banks now have an approved list of auditors and valuers who can value the inventory and help them in the monitoring of the exposure.

[“source=financialexpress”]