People look at jewellery displayed at the Gold Land branch of Atlas Jewellers, in this file photo. Image Credit: GN Archive

Dubai: Banks that were involved in extending credit facilities to Atlas Jewellery chain founder and chairman, M.M. Ramachandran are firm on planning a strategy to recover a total of Dh550 million owed to them. They are acting together and are considering along with other jewellery groups to take over the branches of showrooms.

There is, however, skepticism in the industry on their chances of recovery.

Last week, 15 banks met in Dubai to decide on future strategy and formed a steering committee to press on action. A second follow-up meeting of banks is slated for Tuesday.

As a first step, Ramachandran was reported to have been arrested on after some of the banks presented his security cheques and they bounced. Gulf News have no confirmation from Dubai Police, but senior bankers have confirmed his arrest last Thursday.

Some members of the newly formed steering committee met Ramachandran’s wife, Indira Ramachandran, to chalk out a strategy for recovery of money.

One senior banker told Gulf News: “Ramachandran had recently availed of a huge credit facility to the tune of Dh30 million from certain banks only recently.” Barely a fortnight ago he bought gold jewellery worth Dh20 million from another wholesale jeweller in the market. This jewellery wholesaler, when contacted, declined to comment but said he had filed a case and was pursuing the matter.

“With nearly Dh50 million borrowed in less than a month, it is obvious that the money has not disappeared into thin air. He has obviously diverted the funds into some big investment either in real estate or some other investments. There must be a paper trail that will be revealed with thorough investigation and we need to act quickly,” he said

Industry sources confirmed that the current gold inventory in Atlas jewellery stores amounted to less than five kilograms, with a value of less than Dh2 million.

A chairman of another jewellery conglomerate has expressed dismay at how banks willingly lent so much money to a jeweller who was known to have been facing financial problems for the last decade.

“The morale of the jewellery industry is very low as Ramachandran’s default act has triggered a copy cat response from other jewellers in similar situations. Quick on the heels of the Atlas case we have had a Belgium diamond wholesale dealer who has disappeared and he owed banks at least ten times more to the tune of millions of dollars. Prior to this, there have also been disappearances of rice traders from the commodities markets who suffered huge losses when the price of rice fell and they had to dispose their existing stocks at dirt cheap prices. Disappearing or running away overnight seems to have become the rule rather than exception now.”

The jeweller questioned loop holes in the financial system that are easy to exploit.

“It appears that banks flush with funds are falling over each other to lend money without really checking the retail and operational worth and credit history of an individual or group. In the Ramachandran case.

"It was an open secret that his group was in losses for the last ten years and yet banks continued to lend him money far beyond his actual worth. The security cheque that they hold is a worthless piece of paper and it is unlikely they will be able to recover any amount from him. There is a need to restructure lending laws to protect the interests of the state and the jewellery industry.”

Bank officials, however, disagreed. One official from a local bank involved in the Ramachandran case said: “We had a banking relationship with the group for more than three decades and had a sound relationship with them. We lent him money after due diligence based on the audited balance sheets of the company each year, which did not show any such losses. This is a case of wilful diversion of funds and not a result of losses of many years.”

Attempts made by Gulf News to contact the spokesperson for the Atlas Group met with no response.