That is how diamond buyers bled banks

As the epic Rs 12,600-crore fraud tied to the diamond industry rippled via the united states's banking region, an India today television investigation has unearthed what seems to be a large roundtripping of precious gems to comfortable credits fraudulently from country-run creditors. The research in the monetary hub of Mumbai discovered how unscrupulous diamond merchants deliver the same stocks back and forth to tear off authorities banks with inflated valuations in their books.
In line with RBI estimates, Indian banks have a mixed publicity of $eleven billion (approximately Rs seventy two,000 crore) to the gem stones and jewelry industry. INDIA nowadays television's probe discovered how some of traders had been re-routing bank credits brazenly to riskier ventures like real estate and stocks. On the centre of the PNB scandal are diamond barons Nirav Modi and Mehul Choksi, who are accused of acquiring fraudulent bank guarantees to relaxed credit score for working capital and to pay off older debts, charges they denied.
INDIA nowadays television's investigation observed many players within the enterprise are not any stranger to the modus allegedly deployed by using the uncle-nephew duo. Credit score cash and gemstones are spherical tripped rampantly, in what's called "Pudiya Ghumao" in enterprise jargon, to swell export figures for bigger loans, the probe observed. In a frank communication with INDIATODAY tv's investigative group,  J Patel, a diamond merchant in Mumbai, defined how pretty some agencies perform in cartels to move the same shipments time and again once more on the way to obtain financial institution credits inside the call of working capital.
"assume it (the diamond consignment) is exported from here. You start getting bills (shipment loans) into your books once it's exported to US, Hong Kong, Bangkok, or anywhere overseas," he said. "The exported consignment is then smuggled lower back here. In his books, the merchant is then capable to reveal the cash his foreign clients owe to him. In reality, it is his enterprise distant places." New loans, he said, are used to pay off the preceding ones, and the the rest from over-invoicing effectively pocketed. "files are supplied to the banks approximately those exports and loans sought for running capital to clean the costs. The bank wouldn't come to understand whether or now not the cash is used it to pay off the expenses," Patel disclosed.
"In books, the turnover swells with import transactions which can be then confirmed to the bank. it is all on paper. What all does a government bank employee see? It is handiest turnover inside the books." according to the diamond service provider, a massive amount of such loans is pumped into black market as informal lending on higher hobbies. At one of the international's largest diamond bourses in Mumbai's Bandra Kurla complicated, dealer Rajesh Anavadia of Jewel advent presented to broking a address the undercover reporters seeking bank credit through diamond round-tripping.
"Your real quantity is Rs two hundred crore which includes showing Rs a hundred crore as production cost. So it comes to Rs two hundred crore basic. so you avail loans of Rs 2 hundred crore from India, Hong Kong, Dubai and the us," he stated. "So, it's a total loan of Rs 800 crore for (cloth valued at) Rs 2 hundred crore." In what sounded just like the strategy allegedly used by Modi and Choksi within the PNB case, Anavadia found out how the sham method is used to explode company valuations. "Inflate your turnover this manner to Rs 20,000 crore. Pay the mortgage again where you need to stay, pocket the rest,"he shrugged.
Anavadia then cautioned investing bank loans illegitimately in real estate and inventory marketplace. "You secured a financial institution loan (distant places) after which course it back home through hawala. you can then freely make investments it in any business," he said. "anything property you want to purchase you may with the cash which you have routed back through hawala from Hong Kong. file financial ruin whilst you don't want to pay off the mortgage."
At a espresso outlet in south Mumbai, diamond service provider Gaurav Chaurasia got here across as a one-prevent source for fraudulent loans and their destiny investments.  "at least 30 agencies ought to be registered below one-of-a-kind names and PAN," he insisted. "the entirety's on paper. You do not have original diamonds to show. RTGS and cash move inside and out. we will get you to show purchase for Rs 2 hundred crore. i will set up the whole thing for you. i've my setting in the financial institution. We're going to pay them five percentage in commission."