Surat: The paper chits, which are otherwise thrown into dustbins, have been an important trade instrument in the Rs 90,000 crore diamond industry for over six decades now. But, this ‘chitthi system’ that is based on mutual trust is set to be banished now, reports The Times of India.
Following an increase in defaults and cheating cases, the small and medium diamond unit owners are readying to embrace a more reliable system of ‘jhangad’, a kind of promissory note to arm fraud victims with stronger evidence for legal action. Since September 2014, defaults at least to the tune of Rs 500 crore have been reported in Surat.
Vallabh Borda, a diamantaire in Katargam, has stopped dealing through chithis after losing Rs 50 lakh to a trader. This trader duped 24 diamantaires of Rs 50 crore in January. “I prefer jhangad now. I face a lot of difficulties as many traders in the markets still follow the chit system. I don’t want to lose money, especially when the market condition is not good these days,” said Borda.
Dinesh Navadia, president of Surat Diamond Association (SDA), said, “We have already launched a campaign to persuade traders and manufacturers to adopt this fool-proof system. Some have switched over but many are expected to adopt in the next few months.” Navadia said that all the units will adopt the new system over the next one year.
Arvind Pokia, a diamond unit owner in Varachha, said, “I have sought the help of SDA to guide me on using the jhangad system. My turnover is just Rs 150 crore and I can’t afford to lose my diamonds and money to fly-by-night operators.”
So precious are the paper chits that diamond unit owners keep them in 15 iron vaults in Varachha and Mahidharpura markets along with the gems. These markets witness diamond trade of nearly Rs 400 crore daily – all done through the chitthis.
“In the 1960s, the diamond industry evolved due to closely knit families of diamond polishers, traders and importers. As most of them knew each other, they traded only through chitthis. The tradition still continues,” said Navadia.
None of the technological advances in the last six decades have replaced this system of payment that works on sheer faith.
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