Standard Chartered Bank Cutting Lending To Indian Diamond Firms - Report

(IDEX Online News) – Standard Chartered Bank, an important source of lending for the diamond trade, is planning to reduce its exposure to the business, according to India's Economic Times.

"It's a global decision by Standard Chartered," said a banker with knowledge of the issue. "It's taking a relook at the business. Having aggressively built its loan portfolio since 2009, it now wants to lower the concentration of risk."

The news comes at a sensitive time for the diamond industry, after KBC last week announced that it would wind down the business of the Antwerp Diamond Bank after it failed to find a buyer for the business which was a condition for receiving state aid from the Belgian government in 2009.

Other lenders to Indian diamond companies include state-owned banks such as State Bank of India (SBI) and Bank of India. SBI is believed to have the highest exposure to the country's diamond business, according to the report.

Many diamond companies have been requested, in the past year, to provide more equity in their businesses in order to maintain bank credit lines.

"We understand that Standard Chartered is reducing exposure," said Vipul Shah, Chairman of the Gem And Jewellery Export Promotion Council. "This will hurt the industry at a time when exports are down 10 percent and other banks have tightened financing requirement. The industry is suffering because of a few fly-by-night operators," Shah added.

Indian banks' lending to the diamond trade is estimated at $6 billion to $7 billion, with interest rates of around 13 percent.

Gitanjali Group Chairman Mehul Choksi said the cutback in credit was being carried out "selectively," the report added.