GOODWIN DEFAULT FALLOUT Bullion body wants ban on jeweller deposit schemes

Less than two years after the scam at Punjab National Bank (PNB) involving big names in jewellery segment — Nirav Modi and Mehul Choksi — the Kerala-based Goodwin Group’s default on redemption of jewellery schemes ahead of Diwali has again jolted investors and the industry.

Starting with a small jewellery making unit at Thrissur in 1992, Goodwin gradually got into the segment’s wholesale and retail business. The group entered Mumbai in 2004 and steadily expanded across Maharashtra with its jewellery retail shops, mostly through the owned and franchised routes.

With thousands of depositors’ money in its schemes, the group shut its shops about 10 days ago across Maharashtra. The depositors are on what next to expect and have filed criminal charges against Goodwin promoters A G Mohanan, the chairman-emeritus; A M Sunilkumar, chairman; A M Sudheeshkumar, managing director; and the store managers, alleging cheating, breach of trust, etc.

An e-mail sent to Goodwin Group did not elicit a response.

“While the government had recently amended the law that governs jewellers’ deposit schemes, jewellery companies continue to accept public deposits. The government must ban jewellers from running such schemes. Else, jewellers who have diverted public deposit funds into real estate or any other avenue would continue to default. More such defaults cannot be ruled out,” said Surendra Mehta, secretary, India Bullion and Jewellers Association.

Like it began the Gold Monetisation Scheme, he suggests, the government should start others like it, purchasing gold through banks and crediting this in people’s respective accounts. On maturity, the government can transfer funds in the jeweller’s account, to facilitate a customer’s purchase, he said.

Currently, customers invest in monthly deposit schemes run by jewellers that have no guarantee of redemption. These are based only on trust between a jeweller entity and its customers. These are mostly monthly deposit schemes, for nine or 12 months, and offer the equivalent of 75 per cent or 100 per cent of the first instalment on maturity, to lure customers.

However, there are others who oppose any move to ban such schemes. “Goodwin Group’s default could be one of a case and not be true for all jewellers. Most jewellers have a trustworthy relation with customers. Many investors have redeemed invested funds to purchase jewellery this festive season and have renewed this for another term. Between 30 and 40 per cent of the entire jewellery business comes from monthly deposit schemes. Hence, a ban on such schemes would paralyse the jewellery business,” said N Anantha Padmanabhan, managing director at NAC Jewellers and chairman, All India Gems and Jewellery Domestic Council.

Customers now invest in monthly deposit schemes run by jewellers that have no guarantee of redemption