In an attempt to mitigate the problems faced by the beleaguered diamond industry in Gujarat, the Reserve Bank of India [Get Quote] has decided to set up a task force comprising representatives of the state government, the State Level Banking Committee Convener and other bankers.

The task force will submit its report by the month-end. The decision was announced at the conclusion of a meeting of RBI's central board, chaired by Governor D Subbarao in Ahmedabad on Thursday.

Gujarat's diamond industry has been beset with problems, chief among them being lacklustre Christmas-season demand for finished diamonds from the US and Europe due to the ongoing financial crisis.

The US accounts for 65 per cent of the diamond exports from the state and Christmas is usually the time when demand for exports peaks.

The sector has seen numerous lay-offs in recent months and many units in Surat, the diamond hub of the state, have shut shop, leaving thousands of workers jobless. The dire condition of the sector had prompted Gujarat Chief Minister Narendra Modi to urge the Union government to provide a relief package for the state's diamond industry.

Another major decision announced after the meeting was that the SLBC will review the status of financial inclusion in Gujarat and fix quantifiable targets within a month.

The review will particularly explore how the quality and pace of financial inclusion can synergize with the proposal of the Gujarat government to provide all villages in the state with broadband connectivity.  

It was also decided that the state government will meet bankers and various borrower segments to encourage them to take the maximum advantage of RBI guidelines for restructuring of bank dues of the borrowers.

RBI had allowed banks to carry out restructuring second time for viable units, which are facing temporary cashflow problems.

The central board of RBI is tasked with providing overall direction to the affairs of the apex bank and meets at least once every quarter. Prior to the meeting of the central board, D Subbarao had a one-on-one discussion with Modi.

Yesterday, the RBI governor also met the Gujarat finance minister, senior officials of the state government and commercial banks and financial institutions representatives to discuss state-specific issues relating to banking.

According to rating agency ICRA, the recessionary conditions in developed markets have severely impacted the overall Indian exports of cut and polished diamonds  since October 2008, with sales in December 2008 recording a 27 per cent decline in US dollar terms compared to the corresponding period in the previous year.