The Associated Chambers of Commerce and Industry of India (Assocham) is continuing to lobby for business-as-usual for banks writing letter of credit (L/C) businsess despite their use in high profile trade-based money laundering cases in the diamond trade.

Last month Assocham said India can "ill-afford" a credit slowdown precipitated by frauds perpetrated by celebrity jeweller Nirav Modi and other diamond dealers at a time when credit growth is showing signs of recovery and the economy is set to grow at a higher pace (DC World News, 26 February 2018).

Privatisation calls

Overreaction by banks and investigative agencies to the US$1.9 billion fraud at state-owned Punjab National Bank (PNB) which came to light last month could hurt essential credit disbursement to trade and industry, tempering growth expectations, Assocham said in a new March statement.

The chamber is now arguing that in the wake of the frauds that have been found at other state-owned banks as well PNB that the authorities should contemplate privatising the state's banks.

Restraint needed

"Banks are becoming cautious while there is a perceived public pressure on the regulators to act tough," Assocham secretary general D S Rawat said in the new statement.

"Given the scale of the problem, the level of noise may be justified, but it could cause a huge loss of confidence," he says and concludes, "it is time to show immense restraint and use the adverse situation as an opportunity to fix the systemic issues."

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.