Jewellery exporters' group says it will make it difficult for the duo to enter diamond trade globally
The Gem and Jewellery Export Promotion Council (GJEPC) will await responses (to their show-cause notices) from Nirav Modi and Mehul Choksi till this weekend before escalating the matter to higher ups.
Thereafter, the Council will take a final call about suspending membership of the absconding suspects in the over the Rs 12,000 crore Punjab National Bank (PNB) fraud case, on disciplinary grounds.
According to Colin Shah, vice chairman, GJEPC, the deadline for responding to the showcause notice ends this week. "If the explanation doesn't come (by Friday), it will get escalated to the Council's disciplinary committee.
Thereafter, it will be referred to the Board and the Ministry of Commerce and Industry followed by initiating the suspension process of their membership," Shah said, adding that the Council will follow the legalities and procedures laid down to deal with such instances.
The entire process is expected to complete within four weeks from now. If Modi and Choksi fail to respond to the showcause notice, it's most certain that their membership will get suspended.
Losing the GJEPC membership will spell additional trouble, making it very difficult for the duo to get back into the diamond and jewellery business globally.
As a precautionary measure, the Council has also presented recommendations to the government to put together more stringent norms. This, according to Shah, will help avoid any financial irregularities relating to the industry in future.
"Meetings with officials in the commerce, finance ministries and bankers have been held since this development came to light. We have also made certain suggestions and identified measures on strengthening the entire process to avoid a repeat (of PNB incident) in the future," said Shah.
Among the measures suggested is a diamond and jewellery industry awareness programme for banking executives mainly to build and enhance their understanding of this business/ trade. "Not all banks have people (handling loans) with in depth understanding of how trade/ business is conducted in this industry. Frequent awareness programmes will help in this direction," said Shah.
While banks tend to adopt their own approach when it comes to financing businesses across sectors, it is understood that the Council has suggested a meeting with banking sector chiefs. This meeting is primarily for discussing the existing guidelines and putting together fresh ones to be followed by the banking sector.
As for the impact of this alleged fraud on financing for the Council's 6,500 members, Shah said a major chunk of the industry comprises small and medium-sized enterprises. "They are already struggling for funds and this incident has only made it (access to bank financing) more difficult," he said.
Shah said the gems and jewellery exports are likely to remain flat due to global economic slowdown. "The export growth is expected to be flat at 2-3% this year. However, we are hoping to grow at 10% next year as global economies have started showing signs of improvement," he said, adding that net exports during April to January period were down 8.55% (in rupee terms) year on year to Rs 177,242 crore.
In the crosshairs
- The Council has asked the government to introduce more stringent norms
- This will help avoid any financial irregularities relating to the industry in future
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