A sudden jump in defaults by diamond traders in the past two months have been reported in Surat, Economic Times of India reported.
The news comes as the diamond sector is already being hit by the rupee appreciation.
In the past two months, around 40 to 45 defaults worth Rs 50 crore have taken place in the world’s biggest diamond cutting and polishing centre, the report said. Experts said the defaults could well be around Rs 100 crore during Diwali.
Payment defaults are not new to the industry. Every year during the Diwali festival, the industry witnesses cases of default by traders dealing in polished diamonds.
Sources said the default cases have gone up this season compared to previous years, said the report.
“This year, the situation is quite worrisome for the industry. The default amount is likely to touch Rs 100 crore before Diwali festival,” Surat Diamond Association (SDA) president CP Vanani told Economic Times.
According to Mr Vanani, Diwali is the period when traders settle their accounts with diamond manufacturers before the market closes for a month.
Mr Vanani said the association has been acting as a mediator trying to bring down the default cases. Though SDA has been successful in getting the payment in some cases, in most instances defaulters do not pay up. Sources said the sector witnesses a high incidence of payment defaults since deals are struck based on verbal agreements between traders and manufacturers.
