As the ₹11400 crore Punjab National Bank case unfolds, the Surat diamond industry’s concern is growing. The bank fraud allegedly committed by two closely-related diamond jewellery manufacturers is likely to hit the entire sector.
“We are not directly affected in terms of losing money, but as a sector it has badly hit us,” a prominent diamond baron in Surat said. “The alleged fraud committed by the Nirav Modi-Mehul Choksi duo has tarnished the reputation of those involved in diamond related activities.”
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Industry insiders feel banks loans to the diamond sector will take a hit, which will affect operations, particularly of small and medium sized factories engaged in cutting and polishing precious gems.
Known as the Diamond City, Surat is the hub for diamond cutting and polishing. Around 90% of the world’s rough diamonds are processed in about 6000 factories here that employ around 7 lakh workers. According to Surat Diamond Association’s estimates, rough diamonds worth ₹1 trillion were imported in Surat in 2016-17.
After the massive scam unfolded, owners of small and medium sized units in Surat have been wondering how big players like Modi or Choksi have managed to get massive amounts of credit from the banks while small players struggle to get a working capital of ₹10 crore.
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“A few years ago, Winsome Diamond’s prompter Jatin Mehta had defaulted on ₹6500 crore loans and fled the country. In 2014, I had sought details from the RBI under RTI regarding Mr. Mehta’s loans. The RBI stated that it had no details,” said Dinesh Navadia, a prominent diamond baron and past president of the Surat Diamond Association. Many diamond traders in Surat had stopped all dealings with Nirav Modi and Mehul Choksi, as both were inconsistent in payments. “None of our leading members has dealt with them in the last 4-5 years, particularly after the Winsome Diamond’s fraud,” a senior SDA official said.