LoU ban not to impact Bengal jewellery industry

The festival is celebrated on the 13th lunar day of the dark fortnight of the Hindu month of Kartik and the word 'dhan' means wealth, hence the name 'Dhanteras'. (Image: Reuters)

The RBI ban on Letter of Undertaking (LoU) as a trade finance instrument, will not have much impact on the gems and jewellery industry in West Bengal, but a hike in bank's credit margin may hurt the business, a GJEPC official said.

Pankaj Parekh, former national vice-chairman of Gems and Jewellery Export Promotion Council (GJEPC), said the instrument was used by some jewellers primarily for imports, but there was hardly any import component for Bengal jewellery manufacturers.

"There will be no impact of the ban on jewellers in this region," Parekh told newspersons on the sidelines of a press conference last evening to announce a 3-day international jewellery exhibition in Kolkata early next year. The Bullion Gem and Jewellery Association Secretary (West Bengal) Ravi Karel said earlier the margin sought was 85 per cent of the credit, but now they were seeking a margin as high as 150 per cent.

Bank lending to the gem and jewellery industry may be "squeezed" in the wake of the Rs 13,000 crore scam involving billionaire diamantaire Nirav Modi. Banks have already started demanding higher collateral from existing borrowers, he said.

"They are wanting more collateral or asking us to reduce the loan amount," he said.