Most diamond traders and wholesalers in India would be forced to offload their inventory at a deep discount due to Standard Chartered Bank recalling its loans, aiming to reduce its exposure to the trade in India, and the Antwerp Diamond Bank shutting shop.

Bachhraj Bamalwa, former Chairman, All India Gems and Jewellery Trade Federation said the discount sale in the diamond trade could kick in before Diwali, with most dealers in the trade closing their accounts before the auspicious occasion.

“Traders have to create liquidity to repay their loans, with Standard Chartered Bank recalling some of its loans. This, along with the Antwerp Diamond Bank shutting down its operations, would have a twin impact on trade,” he said.

According to industry sources, ADB has a total exposure of $1.6 billion. Of this, about $1.2 billion is to the trade in Belgium, while the rest is spread across the world, including Hong Kong and India.

Interestingly, about 60 per cent of ADB’s total exposure is to diamond traders of Indian origin.

ADB has lent about $200-230 million (₹1,200-1,400 crore) through its branch in Mumbai. The Belgian banking and insurance company KBC Group NV recently decided to shut down ADB’s operations, as its attempt to sell the bank to the Yinren Group did not succeed.

Exports to be hit

The Gems and Jewellery Export Promotion Council expects the development to add fuel to fire as the industry is already reeling under a financial crisis.

Pankaj Parekh, Vice-Chairman, Gem and Jewellery Export Promotion Council said Indian banks have already trimmed their exposure to the diamond trade, after their exposure to a few scrupulous entities went bust.

“Exports would start shrinking if an alternate source of financing does not come up soon. Exporters supply of rough diamond for the next two to three months is assured, but the future is uncertain,” he added. Indian banks’ lending to the diamond trade is estimated at around $6 billion to $7 billion. Jewellers, however, do not foresee any shortage of diamonds in the retail space.

Rajeev Sheth, Chairman and Managing Director, Tara Jewels said that banks primarily fund the purchase of rough diamonds, as well as for those who cut and polish the diamonds.

“We are in the business of manufacturing of studded jewellery. In the last two years we have reshuffled our portfolio which entails no exposure to foreign banks, with respect to credit facility,” he added.

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