GJEPC sends show cause notice to Modi, Choksi

THE Gem and Jewellery Export Promotion Council has sent show cause notices as to Nirav Modi and Mehul Choksi as to why their primary membership should not be cancelled or suspended in the wake of the PNB scam. GJEPC is also talking to banks and the government, seeking support for the small and medium diamond processors who are facing bank finance crunch post the scam. 

The industry body has sent show cause notices to the registered addresses of the diamantaires and will wait for their reply till the end of this week. If it receives a reply, action will be taken based on their responses. Else, the disciplinary committee will take a call on whether their membership should be suspended, cancelled or both. The process could take two to four weeks.

Once cancelled, the action will not revoked if the entities come back to business after settling the issues related to PNB fraud, said Colin Shah, vice chairman, GJEPC .

“The issue pertains to the fraud committed by two companies and the bank officials. Usually, diamond and jewellery companies are issued only Letter of Credit from the banks with a credit line and not Letter for Undertaking. The incident is an aberration and the entire industry should not suffer due to the bad apples,’ he said.

According to him, most of the small and medium companies in the industry are finding it difficult to get bank finance after the scam surfaced.  These companies require `25 lakh to `10 crore credit for working capital and gold metal loans. While there is no immediate impact of this on the production, he finds that the impact could be visible next fiscal. The exports are already down by 14 per cent this fiscal.

“Almost 80 per cent of the industry is in the hands of small and medium companies. We are meeting banks, the government and other trade bodies for resolution of the issue. There are 20 banks which have an exposure to the gem and jewellery industry. The banks are also assessing their situation. We hope that normalcy will be restored soon,” he said.

 The $43 billion industry has a loan exposure of `70,000 crore. The industry, which employs five million people, has set a target to touch $60 billion by 2022.

Sangeetha G.