Surat: Owners of big diamond companies in the world’s biggest diamond cutting and polishing centre in Surat are on tenterhooks due to frequent visits by bank officials for audit and stock evaluation post the biggest-ever banking scam in the Punjab National Bank (PNB) involving billionaires Nirav Modi and Mehul Choksi.
Company owners said bank officials change at every visit. At most of the diamond companies in the city, bank officials have paid more than five visits after the PNB scam. They check everything, right from account books to diamond stocks and also enquire about order books and details of overseas and domestic clients.
Gitanjali Gems, owned by Mehul Choksi, was the diamond trading company (DTC) sightholder of world’s largest diamond mining company De Beers. At De Beers, the compliance is strict when it comes to financial propriety and industry reputation issues. However, the multi-crore bank scam involving Choksi has destabilized the Indian banks and financial institutions.
A diamond trading company (DTC) sightholder said, “A DTC sightholder has an international reputation as he is a select client of De Beers, world’s largest diamond mining company. Becoming a sightholder of De Beers is very tough and you require financial due diligence, industry reputation, creditworthiness, financial stability and above all the best practice principle (BPP). Now, that Choksi has ruined the reputation, the banks have become cautious of other DTC sightholders as well. This is why the visits of bank officials have increased.”
Despite the bank scam, the diamond industry is confident of achieving high growth in the current year. The reason being that the markets in the US and China — the two most important diamond consumer markets — have showed buoyancy in polished diamond demand in 2018. Though export of polished diamonds fell four per cent, the industry leaders believe it is a marginal decrease and not related to the banking scam.
Gems and Jewellery Export Promotion Council (GJEPC) regional chairman Dinesh Navadiya said, “Bank finance is a major cause of concern after the PNB scam, but the industry stands together in the time of crisis. Without finance, the industry won’t survive and the central government will lose out on foreign exchange. We are talking with leading banks in the country to adopt a soft approach towards the diamond companies.”
Diamond analyst Aniruddha Lidbide said, “Lending is going to be strict after the Rs 13,600 crore PNB scam, but the damage is already done. The banks that had lent thousands of crores to the diamond companies are in a fix as the collateral would be hardly in the range of 20-25 per cent. Until now, the diamond companies were putting diamonds as collateral, but the real value of the stones was not known to the bankers. If a diamond company would value the diamonds at say Rs 40 crore, the banks would not believe easily.”
