NEW DELHI: Banks weren’t the one sufferers of fugitive jewelers Nirav Modi and Mehul Choksi, who allegedly orchestrated the Rs 14,000 crore Punjab National Bank (PNB) fraud.
India’s industry could be an unsuspecting casualty.
As the fraud unraveled, the Reserve Bank of India (RBI) stepped in and banned momentary financing in foreign currency echange referred to as Letters of Undertaking (LoUs) to limit the damage to the financial gadget. The consequence was the cost of price range for exporters and importers rose because the trade was pressured to hunt new credit score gear, stated Ajay Sahai, director common of the Federation of Indian Export Organisations in New Delhi.
The worst hit are the smaller enterprises because the ban is eroding their margins and competitiveness. Trade credit score is tough to secure after jeweler Modi used faux letters to obtain loans in banks in a foreign country. That threatens to choke shipments of gemstones and jewellery -- the country’s third-biggest export -- and widen the industry deficit, which is already the biggest in 5 years principally as a result of upper oil import bill.
Total gemstones and jewellery exports in the April-July duration fell by 1.5 consistent with cent from a 12 months in the past to $13.7 billion, while imports of precious stones -- a key enter for exports -- dropped by 19.5 consistent with cent to $9.84 billion during that time.
“The banning of LoUs was a serious blow,” stated Amitendu Palit, a senior research fellow on the National University of Singapore. “It is not only jewellery exporters which have been affected, but others also. An alternative must be discovered, similar to permitting LoUs with safeguards.”
That view was echoed by a Parliamentary panel, which in a file last month sought restoration of the industry finance instrument on the earliest. The RBI “got unnerved” by the fraud at Punjab National Bank and the ban was a “knee-jerk response”, it stated, while flagging dangers for cost competitiveness of industry and the cascading impact on jobs.
BIGGEST BANK FRAUD
The Choksi-Modi duo have fled the country and are wanted by the courts below a brand new law on fugitive economic offenders that allows authorities to confiscate their assets.
Though buyers nonetheless have get admission to to different varieties of industry finance similar to financial institution promises and letters of credit score, the ban on the meantime promises increases their borrowing costs by about 200 basis issues and is derived at an enormous cost for small buyers.
“We all are paying the cost for what Nirav Modi did,” stated Pradeep Goyal, who runs a steel trading company Agsons Agencies (I) Pvt. “We have spent many sleepless nights over this. My cost has long past up, my cycle has decreased and I’m feeling the crunch.”
India’s industry could be an unsuspecting casualty.
As the fraud unraveled, the Reserve Bank of India (RBI) stepped in and banned momentary financing in foreign currency echange referred to as Letters of Undertaking (LoUs) to limit the damage to the financial gadget. The consequence was the cost of price range for exporters and importers rose because the trade was pressured to hunt new credit score gear, stated Ajay Sahai, director common of the Federation of Indian Export Organisations in New Delhi.
The worst hit are the smaller enterprises because the ban is eroding their margins and competitiveness. Trade credit score is tough to secure after jeweler Modi used faux letters to obtain loans in banks in a foreign country. That threatens to choke shipments of gemstones and jewellery -- the country’s third-biggest export -- and widen the industry deficit, which is already the biggest in 5 years principally as a result of upper oil import bill.
Total gemstones and jewellery exports in the April-July duration fell by 1.5 consistent with cent from a 12 months in the past to $13.7 billion, while imports of precious stones -- a key enter for exports -- dropped by 19.5 consistent with cent to $9.84 billion during that time.
“The banning of LoUs was a serious blow,” stated Amitendu Palit, a senior research fellow on the National University of Singapore. “It is not only jewellery exporters which have been affected, but others also. An alternative must be discovered, similar to permitting LoUs with safeguards.”
That view was echoed by a Parliamentary panel, which in a file last month sought restoration of the industry finance instrument on the earliest. The RBI “got unnerved” by the fraud at Punjab National Bank and the ban was a “knee-jerk response”, it stated, while flagging dangers for cost competitiveness of industry and the cascading impact on jobs.
BIGGEST BANK FRAUD
The Choksi-Modi duo have fled the country and are wanted by the courts below a brand new law on fugitive economic offenders that allows authorities to confiscate their assets.
Though buyers nonetheless have get admission to to different varieties of industry finance similar to financial institution promises and letters of credit score, the ban on the meantime promises increases their borrowing costs by about 200 basis issues and is derived at an enormous cost for small buyers.
“We all are paying the cost for what Nirav Modi did,” stated Pradeep Goyal, who runs a steel trading company Agsons Agencies (I) Pvt. “We have spent many sleepless nights over this. My cost has long past up, my cycle has decreased and I’m feeling the crunch.”
PNB fraud robbed Indian businesses of competitive trade edge
![PNB fraud robbed Indian businesses of competitive trade edge]()
Reviewed by Kailash
on
September 07, 2018
Rating:
