Kolkata, March 21 : The Reserve Bank of India's order to stop the issuance of Letter of Undertakings (LoUs) as an instrument of financing trade is not expected to have any impact on the gem and jewellery industry in West Bengal, an industry official said on Wednesday.
"The instrument is used for the purpose of imports of finished jewellery. And it was being availed by a handful of jewellers primarily for this purpose. However, a majority of the jewellers in Bengal manufacture their own products and there is hardly any import component.
"There will be no impact of the ban of LoU on jewellers in this region," said India Bullion and Jewellery Association's West Bengal President Pankaj Parekh on the sidelines of a press conference to announce a three-day international jewellery exhibition here early next year.
In the wake of the over Rs 13,000 crore scam involving billionaire diamantaire Nirav Modi and his uncle Mehul Choksi, jewellery traders and exporters had apprehended that its "ripple effects" could make lenders more cautious and credit flow to the industry could be impacted to some extent.
"The banks have already started demanding higher collateral from existing borrowers and are reducing credit limits. Lending to the industry may be squeezed to some extent after the unearthing of the scam," said Parekh, who is also a former Vice Chairman of the Gem and Jewellery Export Promotion Council.
According to him, this would impact adversely only those entities which are highly dependent on bank finance, but in West Bengal, a majority of the jewellers are small and medium players with only 10-15 per cent exposure or less to bank finances.
Jewellers also hoped that the exhibition would not be impacted adversely due to the scams.
