Banks have requested the Reserve Bank of India (RBI) to permit them to offer silver (metal) loans to jewellery and artefact manufacturers as there is strong export demand.
Bankers cited the success of the gold loans which were introduced in 1998.
For example, State Bank of India (SBI) provides working capital finance to jewellery manufacturers through gold loans. Jewellers can procure gold as a loan from the bank for manufacturing of jewellery and sell it in the domestic market or export it.
The country’s largest bank offers gold loans up to 180 days for domestic use and 270 days for export. Collateral of 110 per cent Bank Guarantee/Term Deposit Receipt/Working Capital Limit is needed. Repayment in Rupee equivalent at prevailing gold rate is allowed. Gold loans from the Short Term Bank Deposit Scheme can be repaid in 1 kg or multiples thereof.
“In my earlier Bank (erstwhile Corporation Bank), we collected gold deposits from Tirumala (Andhra Pradesh) and Kateel (Karnataka) temples. Once the gold is collected, it cannot be kept idle because depositors expect interest in terms of gold. So, the deposited gold is lent to entities such as jewellery and watch manufacturers. Interest is collected in gold terms. As nominated agencies, banks also sell imported gold on consignment basis. So, what the borrowers do is they buy gold from us and square off the loan. This business is done by select bank branches,” BK Divakara, Head-Strategy & Corporate Legal, CSB Bank, said.
When it comes to extending silver metal loans, he observed that sourcing the precious metal and keeping it in branches will consume lot of space.
Export outlook bright
Despite the global economic slowdown, silver jewellery exports last fiscal rose eight per cent to $2.93 billion (₹23,493 crore) even as the overall gem and jewellery exports fell by five per cent to $38 billion.
However, it plummeted 70 per cent in the first five months of this fiscal to $321 million (₹2,640 crore).
Krishna Behari Goyal, Convener, Silver Panel, Gems and Jewellery Export Promotion Council, said of the global silver exports amounting to $10.04 billion, India plays a significant role by contributing 31 per cent with the US, UK, UAE, France, Germany, Italy being the major markets.
“We need to tap the unconventional markets for growth. The recent FTA with UAE and Australia is a positive sign for us,” he said. To seize this opportunity, he said India needs the government’s support in providing silver at international rates, introducing Ad Valorem, and facilitating silver loans.
Kumar Jain, national spokesperson, India Bullion and Jewellers Association, said the demand for silver jewellery is picking up with onset of festival season from August 15 in India while the orders from export markets should also look up given the response from international buyers at the recent promotional events and the US imposing ban on imports from Russia.
Colin Shah, MD, Kama Jewelry, one of the largest exporters, said there is a huge room for a rise in exports of silver due to a combination of factors such as global economic slowdown, currency fluctuation and higher domestic production, he said.
Prices of silver and gold have been volatile largely due to a lack of clarity on inflation and interest rates on a global front.
Ajay Kedia, Director of Kedia Commodities, said silver demand isn’t solely tied to jewellery; it’s also influenced by industrial usage and rising needs from solar manufacturers. He mentioned a potential uptick in Chinese demand due to economic growth efforts and an increase in mobile manufacturing.