Nirav Modi scam may lead to stricter norms, say Mumbai merchants

Modi, his brother, wife and a business partner have been booked by the CBI for allegedly cheating Punjab National Bank (PNB) of more than hundreds of crores in 2017.

Gold and diamond merchants fear the Nirav Modi banking fiasco could lead to stricter norms for loans and credit facilities for them.

Modi, his brother, wife and a business partner have been booked by the CBI for allegedly cheating Punjab National Bank (PNB) of more than hundreds of crores in 2017. (FILE)

Modi, his brother, wife and a business partner have been booked by the CBI for allegedly cheating Punjab National Bank (PNB) of more than hundreds of crores in 2017. They have been accused of fraudulent issuance of letters of undertaking (LOU) to avail credit for making payment to overseas suppliers.

Mahendra Gandhi, president, Mumbai Diamond Merchants’ Association, said that traders have now become wary. “We fear banks will become stricter in loan disbursal,” said Gandhi.

Mumbai is one of major diamond export and trading hubs in India and contributes significantly to the exchequer.

Diamond or gold traders submit a copy of export orders to banks to get credit. This amount is utilized to buy diamonds and polish them. The amount is returned after the transaction.

Kumar Jain, vice-president, Mumbai Jewellers’ Association, said, “We fear banks will now stay away from disbursing loans. This will affect the cash flow. The paperwork will increase significantly and getting loans will become tougher.”

Diamond industry expert Hardik Hundiya said the scam was bad news. “The banks will start forcing traders to pay back the loans,” said Hundiya.