RAPAPORT… The State Bank of India (SBI) has introduced stricter lending conditions for certain gem and jewelry companies in the wake of the Nirav Modi scandal, The Economic Times reported.
India’s largest bank will require existing borrowers with inadequate safeguards either to raise their collateral to 40% to 50% of the loan value from the current 10% to 15%, or to repay at least half the balance of their principal, the newspaper said Sunday. Those clients will also need to present the bank with a detailed plan of how they will implement this mandate.
Allegations that Modi, together with Gitanjali Gems managing director Mehul Choksi, defrauded Punjab National Bank of $2 billion have put risk mitigation in the spotlight since reports of the claims emerged in February.
“We review the underwriting system whenever delinquency comes into question,” the Indian publication quoted Sunil Srivastava, deputy managing director of SBI, as saying.
Image: Indraprakashinfo
India’s SBI Tightens Loan Terms for Jewelers
The Bottom Line
- SBI now requires certain gem and jewelry borrowers to increase collateral from 10-15% to 40-50% of the loan value or repay at least half of the principal balance.
- Borrowers must submit a detailed plan to SBI explaining how they will meet the new lending conditions.
- The tightened loan terms follow the $2 billion fraud allegations involving Nirav Modi and Mehul Choksi, highlighting increased risk scrutiny.
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