On Thursday afternoon, Nitin Khandelwal, chairman, All India Gems & Jewellery Trade Federation (GJF), was busy drafting answers for foreign publication on Nirav Modi. The irony is the 52-year-old Khandelwal never met him nor has Nirav Modi or any member of his company or any other diamond association in India.
"Until the news of scam broke out, 95 per cent of the jewellers and traders didn't know who Nirav Modi was," says Khandelwal, a fifth-generation entrepreneur and CMD of Khandelwal Jewellers Akola Pvt Limited who is still in shock as to how Nirav Modi managed to get such a huge loan without the backing of margin money. "For the last few months, I am asking for a loan enhancement of Rs 10 crore for business expansion and the banks are denying it without the 100-per cent margin money. It's surprising how (Nirav) Modi was given such huge credit," he says, adding that "A few years back I had to even keep 10 per cent cash margin with banks even in case of a gold loan."
Khandelwal sees a sharp dip in the value of diamonds and jewellery confiscated with the authorities and government agency. "It wasn't easy to buy a product from Nirav Modi. Even if you entered his showroom to buy Rs 10 lakh worth of diamond products you wouldn't get the product. You needed an appointment as well as a reference to buy the product from him," says Khandelwal.
He adds: "There was no benchmark on the price he used to charge on his products. They were easily five to six times higher than what one could have got in the Indian market, and therefore today when the products are out from his showroom they aren't the same value. My guess is that it will only be worth one-fourth or one-fifth of the cost."
He said the Nirav Modi's brand value had disappeared overnight and the products confiscated would be priced according to the actual market value, not the price it used to enjoy at his showrooms.
The PNB fraud has happened at a time when the industry is trying to come out of the impact of the demonetisation and the GST; the centre in January brought down the GST on rough diamond from 3 per cent to 0.25 per cent. The recent bank fraud has certainly given the diamond traders a reason to worry about their working capital and funding from banks.
Says Khandelwal, "The diamond industry gives direct employment to one crore people and as many as 35 sectors from packaging to logistics. Therefore, banks should not treat us likes thugs. For us, our name is more important. Our history says we have sold off our house and property to repay banks. We can't have a bad name in our own community; we would otherwise be out-casted from the society."
The Modi-PNB scam has hit small and mid size companies, for banks, particularly state-run, have suddenly increased scrutiny by adopting stringent measures, which has delayed disbursement.
The Gems and Jewellery Board will meet next week to take a decision on Mehul Choksi's membership. "Barring the senior officials and management personnels, we will help employees of Gitanjali by accommodating them. We will do whatever we can to get them employment."
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