(ET)
State Bank of India, India’s largest lender, is tightening the noose around borrowers in the gems and jewellery sector by telling them to either bring in more collaterals to back the existing borrowings or reduce the size of it in a time-bound manner.
The decision was driven by the board which directed the management to plug the gaps in risk mitigation system, especially for borrowers in the jewellery sector which has been in the eye of the storm after the Nirav Modi-led Rs 12,300 crore fraud was detected in Punjab National BankBSE -1.24 %.
SBI has reviewed all loans given to jewellers in the wake of the Nirav Modi scam to find out whether adequate safeguards were taken while giving the loan. In case of divergence, the bank has written to its borrowers to raise the collateral level to at least 40-50% of the loan value or cut the size of the borrowing by half.
