Indian banks exit diamond financing business in Antwerp
TNN | Jan 12, 2019, 06.29 AM IST
SURAT: Small diamantaires and merchants purchasing rough diamonds from rough diamond dealers in Antwerp are staring at tough days ahead following the exit of Indian banks from diamond financing in Belgium.
While the Union Bank of India exited last year from Belgium, the ICICI Bank has recently decided to close its Antwerp branch giving a big jolt to industry players.
The US-based Rapaport group has stated that the move followed a strategic review of the ICICI’s business operations in the country, a spokesperson for the company confirmed. The bank has asked its customers to close their accounts by February 28, according to a December 28 notice to its clients.
The Union Bank of India also announced it was leaving the Antwerp market last year, citing the disappointing performance of its diamond business. Belgium’s KBC closed its Antwerp Diamond Bank in 2014, while London-based Standard Chartered stopped extending credit to the midstream in 2016.
The small diamantaires and rough traders from Surat and Mumbai purchase rough diamonds from big companies having bank credit facilities in Antwerp. Now with the Indian banks exiting the diamond sector in Antwerp, the small diamantaires are left with no choice.
Regional chairman, gems and jewellery export promotion council (GJEPC), Dinesh Navadia, told TOI: “Small unit owners and merchants used to purchase rough diamonds from big rough diamond dealers in Belgium having credit facilities with the Indian and Antwerp banks. With the exit of the banks from Antwerp, which is the world’s largest diamond trading hub, the diamantaires are left with no choice but to reduce their production.”
Himmat Bhadiadara, a rough diamond merchant in Mahidhapura, said, “We are dependent on the big dealers having bank credit facilities. If the banks are exiting Antwerp, it will be difficult for us to purchase rough diamonds. To run our factories, we will have to take money on hefty interest rate from the market.”
The total exposure by the Indian banks to the diamond trade is between $6 billion and $7 billion. The interest charged is around 13%.
Being the world’s largest diamond cutting and polishing centre, India’s annual rough diamond imports is pegged at $ 18 billion.
However, the Belgian banking institution accounted for about 11% to 12% of the global diamond finance market. Traders use loans to buy rough, or uncut diamonds in auctions from mines in resource-rich areas like Africa.
“Without bank financing, the diamond business cannot survive for longer period. Antwerp is the hub of rough diamond trading, as more than 70% of the diamonds flow from here to India. Small traders will have tough days ahead,” said diamond industry analyst Aniruddha Lidbide.