Organised sector players, including online diamond trading platforms such as Indian Commodity Exchange (ICEX), are set to benefit from the ongoing shift in diamond retailing. With these larger players offer credit to small and medium size diamond traders, the industry
is set to move on to the private credit lending path. Both Nirav Modi and Gitanjali Gems were said to have also been passing off American diamonds as natural ones and selling them at inflated prices.
“Organised sector players such as ICEX offer reliable diamond pieces certified by world-recognised certifying agencies like the Gemological Institute of America (GIA) and International Gemological Institute (IGI), among others. Hence, such diamonds come from trusted sources. Apart from that, organised sector players also offer credit to small and medium size players due to the lack of financial assistance to them from the banks. Hence, there has been a shift in the business from the unorganised to the organised sector,” said Dinesh Navadia, Secretary, Surat Diamond Association.
Informed sources say SBI has reviewed all loans sanctioned to jewellers after the PNB-NIrav Modi-Gitanjali Gems scam outbreak to check whether or not adequate safeguards have been taken. The bank has directed its officials to focus on increasing collateral to 40-50 per cent of the loan value or cut the size of exposure in case any lacunae are discovered. Others believe some banks have started asking for collateral equivalent to 100-120 per cent of the value of goods following the ban on letters of undertaking (LOUs) and letters of comfort (LoCs) this week.
Meanwhile, since the scam occurred around the first week of February, volumes on ICEX have increased significantly to 113,372 lots worth Rs 225 million as of March 14, from 83,294 lots worth Rs 323 million on February 9.
“ICEX offers polished diamond futures in one carat and 0.50 carat sizes, which are available in limited quantities in the market. ICEX needs to launch more smaller sized diamonds to foster greater participation from small players,” said D Chintan, Director, Dhiran Diamond, a Mumbai-based polished diamond trader.
Organised and credible diamond certifying agencies have also seen a major rise in volume intake over the past five weeks since the scam erupted.
Manoj Dwivedi, Joint Secretary of the Ministry of Commerce, Government of India, however, called for a strong self-regulation in the gems and jewellery sector to avoid occurrence of another scam.