JOIN US5 years after Nirav Modi fraud, PNB to lend to synthetic diamond makers
When diamantaire Nirav Modi, along with his uncle Mehul Choksi, pulled off one of the biggest banking frauds in India five years ago, it made lenders cautious while giving loans, especially to diamond makers, but Punjab National Bank (PNB) may be turning over a new leaf.
PNB, which suffered the most at the hands of fugitive Nirav Modi incurring a loss upwards of Rs 14,000 cr, has rolled out a new internal policy to loan money to companies that make lab-grown or synthetic diamonds, The Economic Times reported.
The bank will extend working capital and loans to the stone makers against 100 per cent collateral security and a high internal rating of the borrower, a source told ET. The bank may extend the working capital credit line of up to Rs 50 cr. This comes a year after the State Bank of India (SBI) launched a similar policy to lend to the sector as demand for synthetic diamonds started climbing. IndusInd Bank may soon enter the sector, too.
The report added that a new lobby of jewellers coming up in Surat, setting up factories and the government’s decision to slash import duty on basic raw material ‘diamond seed’ is driving demand in the sector. Synthetic stones, while looking as shiny as their mined counterparts, cost about a third.
SBI’s policy only allows primary term loans, but PNB will also extend working capital loans to the sector.
“Lab-grown diamond (LGD) production does require sophisticated laboratories. So, financial assistance is essential to achieve higher growth in manufacturing. The LGD global market has the potential to cross $40 bn by 2030,” Tehmasp Printer, MD of International Gemological Institute, told the publication.