Indian Credit Down 18% Since Nirav Modi Scandal

RAPAPORT... Lending to India's gem and jewelry industry fell 18% during the past two fiscal years as the 2018 Nirav Modi banking scandal continued to fuel caution among banks, according to credit agency CARE Ratings.Outstanding credit to the sector declined 1% to INR 721 billion ($9.54 billion) during the fiscal year ending March 31, 2019, from INR 727 billion ($9.63 billion) on March 30, 2018. It then slumped 17% to INR 595 billion ($7.88 billion) as of March 27, 2020, the Mumbai-based ratings group said in a report last week. "The gems and jewelry industry is facing increasing pressures on borrowings due to cautious and reduced bank lending, which is much more evident with unorganized and small-scale players," CARE noted in its June 1 update. "After a financial scam broke out in January 2018, bank lending to this industry is on a consistent decline."Modi and his uncle, fellow jeweler Mehul Choksi, fled India in 2018 following allegations they defrauded India's Punjab National Bank of $2 billion in the largest banking fraud in the country's history. That has contributed to weaker appetite among potential lenders to the industry, with concerns about the profitability of diamond manufacturing adding to banks' restraint. Meanwhile, the coronavirus-related lockdown has dented India's diamond business, with polished exports down 48% to $960 million, according to the Gem & Jewellery Export Promotion Council. CARE predicted an improvement in India's exports for May and June following the reopening of Mumbai's diamond trade, but said they could subsequently decline again before rising later in the year. "We expect [a] gradual recovery of trade [from the third fiscal quarter] onwards, as lockdown eases and operations start resuming to normality," CARE forecast.Image: Indian rupees. (Shutterstock)