PNB fraud impact! Bank finance to jewellery sector drops by 10%, says report

Jewellers are facing challenges in availing funds from banks after the Punjab National Bank (PNB) fraud case, where diamond traders Nirav Modi and his uncle Mehul Choksi are being investigated by the Enforcement Directorate (ED) for allegedly cheating the bank to the tune of around Rs 13,500 crore.

Gold prices tumbled by Rs 290 to Rs 30,340 per 10 grams at the bullion market today.

Bank finance to the gem and jewellery sector has declined by at least 10 per cent, which will adversely impact exports, GJEPC cautioned in a report. The apex body of the gems and jewellery trade in its report today also estimated that the exports in the current fiscal year will see a drastic drop of 10 per cent.

“Bank finance is the life line of the industry and any decrease would see a decrease in gem and jewellery exports as well,” said Colin Shah, Vice chairman, Gem & Jewellery Export Promotion Council (GJEPC). He alleged that after all the efforts to make sure genuine players continue to get the finance, banks are insisting for discounting that all customer invoices should be through the bank which is seriously hampering relationships with customers as well as cash flow on a daily basis. “Banks have also taken away all benefits on assessment fees due to which cost of finance has gone up,” said Shah.

Jewellers are facing challenges in availing funds from banks after the Punjab National Bank (PNB) fraud case, where diamond traders Nirav Modi and his uncle Mehul Choksi are being investigated by the Enforcement Directorate (ED) for allegedly cheating PNB, the country’s second largest lender, to the tune of around Rs 13,500 crore.

Pramod Agrawal, chairman, GJEPC, said that the Council is taking all efforts to self-regulate and instill confidence amongst key stakeholders through a slew of reforms. “However, the industry is seeing a crisis of sorts as banks have curtailed lending to the traders and are demanding collateral security and extensive documentation,” he added. In such a scenario, Agrawal said, the gem and jewellery sector, a USD 41-billion export industry, will see a gradual decline in FY19.

Urging the government to intervene and give some relief to the ailing industry, he called for bringing back interest subvention scheme to help in ease of doing business. According to GJEPC, the country’s gem and jewellery exports declined by 8.84 per cent during the June quarter to USD 10.1 billion, compared with USD 11.1 billion in the same period last year.

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