Nirav Modi fraud: Jewellers apprehend impact on credit flow to industry
Nirav Modi (File Photo/ IANS)
Kolkata : Jewellery traders and exporters are apprehending that “ripple effects” of the $1.8 billion fraud involving billionaire diamond trader Nirav Modi’s companies could make lenders more cautious and impact credit flow to the industry to some extent, officials said here on Friday.
However, they also said that in the wake of the fraud, the entire gems and jewellery industry should not be blamed or branded as “risky” industry.
The Punjab National Bank had admitted to unearthing a fraud of Rs 11,515 crore involving Modi’s companies and certain other accounts with the bank’s flagship branch (Brady House Branch) in Mumbai and its second largest lending window in India.
“Some ripple effects are bound to happen and it (the fraud) will have some psychological impact on the mind of loan advancers. Whenever a banker is financing someone, he will be more cautious to check out whether there is any possibility of fraud or not. This could impact credit flow to the industry or lead to delay in extending advances,” Gem and Jewellery Export Promotion Council (GJEPC) Regional Chairman (Eastern Region) Prakash Chandra Pincha said.
He, however, said the entire industry cannot be blamed for a single person’s act.
“I do not think the exports of gem and jewellery and the industry as a whole will be impacted by this fraud,” he said, adding that the council has been a whistle-blower and had cautioned the government over “round tripping” issue.
The council does not hesitate to inform the government if any policies or schemes are misused, Pincha said on the sidelines of inauguration of “Sonar Sansar”, a four-day exhibition of gems and Jewellery.
GJEPC’s former Vice Chairman and India Bullion and Jewellery Association West Bengal President Pankaj Parekh said not only bankers, insurance companies could now also turn cautious in extending their services to jewellery exporters.
“Following the fraud, the bank may ask for more collateral before providing credit to jewellers or jewellery exporters. Due to this fraud, the entire industry might be branded as a risky industry. This should not be done. Unfortunately, our past experience has been like that particularly after the incident of Winsome Diamonds default,” Parekh said.
After the implementation of Goods and Services Tax (GST), the industry has been faced with “refund problems”, which is resulting in “dearth of working capital”, Pincha said.
“Post exports, we are to get the refund but that is not coming. However, the payments of refunds have been started right now. But it is after seven months and a lot of working capital of jewellers has been blocked due to delay in payments of GST refund. It is a burning problem,” he said.
Parekh also said exporters started receiving parts of Central GST (CGST) refund but the State GST (SGST) refund payments have not been started.
“With the delay in payment of refund, the profitability has reduced and the exporters’ confidence was also impacted,” he said, adding that the impact of the Nirav Modi fraud case and crunch in working capital due to delay in GST refunds would act like a “double whammy” for the industry.
IANS
