Nirav Modi scam: Diamond traders now courting firms with long-term credit

In the aftermath of the Rs 129-billion fraud at Punjab National Bank (PNB) involving Nirav Modi and Gitanjali Gems, traders of loose diamonds are now shifting to organised sectoral players with deeper pockets for credit offers to consumers.

Since most banks have tightened their lending to diamond merchants and others are in the process of doing so, many medium and small diamond dealers are approaching large players for credit facility within the industry. Early last week, State Bank of India, the country’s largest-public sector bank, announced its decision to tighten collateral demands on borrowers from the gems & jewellery industry. Several gems & jewellery makers and retailers recently observed at the India International Bullion Summit (IIBS) that banks had stopped lending to them as they now had a suspicious view of the entire sector, especially after the PNB-Nirav Modi scam.

With organised sectoral players offering credit to small and medium sized diamond traders, the industry is set to move to a private credit regime. Organised players, including online diamond trading platforms like Indian Commodity Exchange (ICEX), are set to benefit from the ongoing shift in diamond retailing.