Indian Industry to Do Away with Chits to Reduce Defaults

(IDEX Online News) – The diamond industry may be known for its traditional image, but sometimes tradition and good business can be at odds, which is why industry leaders have launched a campaign to do away with the traditional system of using paper chits for diamond deals. Instead, they are urging traders to adopt more secure systems such as the exchange of promissory notes, checks and jhangad (entrustment note), reports the Times of India (TOI).

The campaign, which is being organized under the aegis of the Surat Diamond Association (SDA), has been launched to try to reduce the number of defaults in the industry and to better protect diamond merchants.  

According to the TOI, Small manufacturers and traders usually perform deals via the exchange of paper chits, upon which buyers and sellers agree on the payment on the quantity of goods sold in a specific timeframe.

"Till few years ago, diamond business was run on faith, trust and a chit of paper. Now, things have changed as the unscrupulous elements started cheating the merchants and manufacturers. It is high time the small and medium diamantaires should follow the system of jangad and advance check to nail the defaulters in the court of law," K K Sharma, CEO of the Surat Hira Bourse said, as quoted by the TOI.

Dinesh Navadia, president of the SDA told the paper that the association is appealing to all diamantaires to adopt the new system for the good health of the industry. “Police want evidence and not the paper chits. Thus, we are spreading awareness among the diamantaires to use promissory note, entrustment note and advance cheques at the time of diamond deals."