Banks are to work with India's jewellery industry to improve due diligence measures in attempts to repair the creditworthiness of the country's jewellers.

Their creditworthiness has been impaired since local banks were forced to take on non-performing loans after foreign banks encashed standby letters of credit (L/Cs).

Confidential reports

India's Gems and Jewellery Export Promotion Council (GJEPC) has agreed to help banks make sound lending decisions on member companies seeking credit from banks.

The council will provide confidential reports about the financial health of member companies and if it is unable to provide sufficient information, then the GJEPC will recommend the bank investigates a company's affairs in more detail.

Non-performing loans

This move responds to a loan default by Winsome Diamonds amounting to some US$100 million.

A 15-bank consortium led by Punjab National Bank provided stand-by L/Cs to Winsome in favour of international banks including Standard Chartered, Standard Bank and Scotia Bank.

Winsome failed to service its loans claiming its clients had failed to pay their dues, leading the foreign banks to draw upon the L/Cs, leaving the Indian banks saddled with non-performing loans.

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