Indian Diamond Banks Seek Ways to Recover $452 Million

(IDEX Online News) - The day after the Diwali weekend, the State Bank of India (SBI), one of the world’s two top diamond industry lenders, today said it was proceeding “with caution” as it assessed the situation regarding the $452 million (Rs.20 billion) that is overdue to a consortium of banks, from a dozen Indian diamond firms based in Surat.

JB Diamonds, one of the 12, had recently been declared a defaulter to the tune of $180 million (Rs.8 billion) by the consortium, of which the SBI is the lead lender.

However, a source at the SBI’s diamond division in Mumbai, who requested anonymity, told IDEX Online that the bank hadn’t changed its overall attitude to the diamond industry. “We assess each business separately and so we’re not backing away from those businesses that are run properly. Caution is the watchword for banks with all industries and not just diamonds after the recession,” he told IDEX Online, adding, “right now, we know that many of these units are under stress.”

Several of the firms named by the banks have declared their intent to repay all the banks’ money, stating they need more time to do so.

Industry watchers say the money woes of some of the firms are due to expansion into other businesses like real estate, the stock market, oil and other mining sectors with bank funds meant for their diamond businesses alone.

All of these non-diamond businesses took a major hit during last year’s recession. The SBI’s lack of a dedicated relationship banking division focused on the diamond sector alone is cited as one of the reasons why early warning signals of this were not picked up.