INSUBCONTINENT EXCLUSIVE:
MUMBAI: A year after Nirav Modi-Mehul Choksi scam rattled nation, diamond houses in India are being pushed to change way they have been
doing business for many decades
Harsh new rules laid down by large banks would force them to restructure their entities, change business associates and spend more.
The
largest lender to diamantaires, State Bank of India, has imposed funding restrictions on borrowers for exports to countries other than USA
and Europe, capped exposure at Rs 1,000 crore per borrower, and set stiff credit rating condition on diamond houses for additional
finance.
In its credit policy for diamond houses, finalised in 2018-end, bank has stipulated that borrowers would have to give an
undertaking that rough or cut and polished stones are not procured from associate concerns or related parties as a condition for fundbased
working capital finance by way of pre-shipment or packing credit in foreign currency.
Also, all existing borrowers with outstanding of Rs 50
crore or more would have to convert partnership firms into corporates by December 2019 - a move that would increase their tax liability
Diamond houses that are unable to transform into corporates would have to bring in additional collateral and pay half a percentage point
sharp practices that few diamond houses indulged in
One can understand exclusion of Dubai
But a quarter of polished stone exports is to Hong Kong, with China, along with Hong Kong, emerging as one of largest manufacturing centre
compel many diamond houses to rejig themselves in a trade that is known for its secrecy and dealings among community members
another in Dubai to buy polished exported from India, which are then sold to US, Japan and markets across world
advance payments for procurement of rough diamonds will be permitted to only mining companies as per list approved by RBI and Gems
safeguards that SBI is putting in place, they feel some conditions could be stifling
A corporate, unlike a partnership, would have to disclose to Ministry of Corporate Affairs charges on assets against loans
So, there would be greater disclose, they agree
They also admit that restriction on advance payment probably follows a few parties making multiple remittances from different banks.
