Ahmedabad, Feb 17 (KNN) In the aftermath of the fraud involving Billionaire Jeweler Nirav Modi, the Micro, Small and Medium Enterprises (MSMEs) of the sector will have to face wrath as banks might turn hesitant in offering loans to the sector, All India Gems and Jewellery Trade Federation (GJF) said.

Talking to KNN, Nitin Khandelwal, Chairman of the All India Gems and Jewellery Trade Federation (GJF)  said that in the recent times the sector have already not been able to perform good.

With the demonetization drive and the roll out of GST and also the implementation of the PMLA, all had cumulatively led to the slowdown of business for the sector. Now if fears come true and banks tighten their doors for the MSMEs, it will further impact the sector.

Khandelwal informed that the honest small scale enterprises that wishes to conduct business are not able to obtain loans easily.

"While the MSMEs that request loans with a ticket size of 1 crore to 50 crore, despite furnishing documents and collateral are not able to secure loans easily, now that a big scam has taken place, the banks would further not lend to the sector", he lamented.

Comparing the case of an MSME with that of the scam Khandelwal said on one hand an honest small scale entrepreneur approaches the bank for a small ticket size of 1 crore and the bank even after a long and tedious procedure might not approve his request, whereas on the other hand jewelers who are not doing their business in India are given such big loan amounts and are allowed to flee.

The MSMEs in gems and jewellery sector generate a lot of employment being labor intensive, thus adding to the economy both in terms of growth as well as employment, the situation that is to follow after the banks close their doors is scary, he added.

"The trust-harmony relation between the lenders (banks) and the sector is on the verge of getting disturbed amidst this scam", Khandelwal said.

Condemning the fraud, Khandelwal informed that the alleged scamster Nirav Modi is not a member of their federation and his act is bound to have repercussions on the sector in total. While the large players might be able to survive the high tide, the MSMEs will feel the impact.

Also earlier industry body FICCI condemned the action and raised that the authorities should take stringent action against such frauds.

FICCI in a press statement said it unequivocally condemns the illegal and unethical business practices adopted in the recent PSU Bank fraud case and commends the speed with which the Government agencies including Enforcement Directorate, Central Bureau of Investigation and other agencies have moved to take the investigation forward.

Fraudsters should be expeditiously punished in accordance with the law and FICCI supports the need for swift and strict action against those companies who have allegedly defrauded the banks.

FICCI also recommends that in order to strengthen systemic and others risk management systems within the banking ecosystem, a thorough root cause analysis be done to plug the gaps and ensure there is no repeat of any wrongdoing that impacts the rightful functioning of any banking institution while discharging its duties to its customers and stakeholders.

FICCI defends the freedom of business enterprise but does not support illegal and unethical business practices, the press release added. (KNN/DA)