PNB fraud case causes banks to refrain from lending to jewellers
Jewellery businesses are facing difficulties securing loans from banks following the ongoing fraud scandal that implicates jewellers Nirav Modi and Mehul Choksi in the largest scale fraud in India’s banking history.
The Gem and Jewellery Council’s Vice Chairman Anandha Padmanabhan recently said in a statement: "The major challenge today we face is funding for the industry. Our immediate requirement is around Rs 15,000 crore. Earlier some jewellery retailer went bankrupt. After Nirav Modi issue, the issue has gone up pan-India."
Padmanabhan stated that banks are citing “recent developments” as reasons not to give loans to other jewellery businesses and traders but Padmanabhan is certain this refers to the PNB fraud case.
However, although the current climate is dissuading banks from lending to jewellers, some jewellery businesses are asserting that the PNB scandal has not harmed their sales. The President of De Beers Stephen Lussier, for example, recently told the Press Trust of India that sales had not been affected by the alleged fraud. However, an Assocham survey back in April reported that some jewellers were witnessing a decrease in demand for diamond jewellery following the scandal.
As well as the PNB fraud case, where Modi and Choksi are accused of obtaining Rs 13,400 crore ($2 billion) through fraudulently obtained letters of understanding (LoUs) at the PNB alone, the Enforcement Directorate (ED) has also made a case against Kanishk Gold for an alleged Rs 824 crore fraud.
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