The bullion industry today urged the government to intervene and ask banks to provide finance to the cash-starved industry, which is stressed due to steep fall in gold prices and lack of demand.
"We have approached the Finance Ministry and the Prime Minister expressing our concerns on rising losses and NPA of the sector. We have asked the government to ask the banks to fund the gems and jewellery sector, which is already stressed due to steep fall in gold prices and lack of demand," India Bullion and Jewellers Association (IBJA) president Mohit Khamboj told reporters here.
The bank lending to the sector is at about Rs 2.5 lakh crore, and was cut drastically in last few months, he added.
"About 50 per cent of the banks' exposure to the sector is non performing assets (NPA) and 25 per cent has become stressed asset after the fall in gold prices. And if the government does not intervene to ease liquidity crisis, the entire lending may turn into NPA," he said.
Khamboj said the industry has been facing problem in accessing loans since 2013, when the government restricted gold imports to bridge the widening current account deficit.
He said during the last week, gold market has witnessed a steep fall in the prices to USD 1,085 from USD 1,140 in the international market. In the domestic market the prices have fallen from a high of Rs 34,000 per 10 grams to a low of Rs 24,700, losing more than 27 per cent, in a span of nine months. The prices may go down further to Rs 23,500 with China offloading the yellow metal from its reserves to withstand the current economic crisis, he said.
Demand in the domestic market had declined by 10-15 per cent and in the coming festive season, beginning with Raksha Bandhan in August, it may go down by 40 per cent, he said.
Khamboj also said that IBJA is planning to set up 100 gold coin showrooms in major cities in the next 3 years, where 2,200 types of coins will be available. The first showroom will be launched in September. It is also planning to launch a web portal to help jewellers tap the online market, he said.
IBJA has also received government approval to set up World Silver Council, an apex body to fix prices and set quality standards, he added.
