Lenders group to recover Rs 4Kcr default from Winsome

A consortium of 15 banks, mostly state-run lenders which face the prospects of losing about Rs 4,000 crore after three foreign lenders of the troubled jewellery exporter Winsome Diamonds encashed their letters of credit, have formed a core group to monitor the issue on a regular basis.

Also Read: Winsome Diamonds turns defaulter, lenders tighten screw

The core group includes Punjab National Bank (PNB), Bank of India, Central Bank of India and Canara Bank, according to a bank official. "We have formed a core group to monitor the Winsome account and talk to the promoters. We are regularly monitoring the account and we met even yesterday to take stock of the issue," a senior official of a city-based public sector lender that is part of the core group told PTI.

Domestic lenders like PNB, which is the consortium leader with around Rs 1,800-crore exposure, and other banks had given standby letters of credit (SBLCs) worth over Rs 4,000 crore in favour of international bullion banks like StanChart of London, Standard Bank of South Africa, and Scotiabank, which have encashed these LCs recently after the Mumbai-based firm failed to pay up these foreign banks.

Winsome Diamonds & Jewellery, earlier known as Su-Raj Diamonds reportedly failed to service the dues on time following default by its clients who reportedly lost heavily on derivatives following the steep fall of gold prices. The issue relates to Windsome's purchase of bullion from these three bullion banks for which it had raised letters of credit from 15 domestic banks in favour of these three foreign banks.

The problem started after Winsome's Dubai-based clients defaulted on their payment, leading to Winsome also defaulting its payment to foreign banks, which in turn invoked one of the letters of credit, resulting in all the LCs being invoked even before the maturity period.