The Belgian banking and insurance group KBC Group has previously decided to begin curtailing the lending activities of its Antwerp Diamond Bank.
According to a number of sources, 60% of the total volume of ADB operations, which is $ 1.6 billion, is accounted for by Indian traders. In India itself, through its local branch, the bank is reportedly performing operations in the amount of $ 200- $ 230 million. Thus, the prospect that the ADB may require a short repayment of borrowed funds will cause chaos in the industry, which is already in a difficult situation financial situation. There is a danger of an inevitable liquidity crisis among diamond traders, especially in Mumbai and Surat.
"Now that the group has decided to wind down its business, diamond traders may be required to meet short-term loan requirements with the Indian branch of the bank," explained the chairman of the Gems and Jewelery Export Promotion Council (GJEPC), the Indian Council for the Promotion of Gems and Jewelery, Vipul Shah.
"This week we will hold meetings with representatives of the bank in order to increase the time of payments, as this will affect the liquidity of the diamond industry in the very near future," he said.
The bank has not yet reported on the timing of payments of borrowed funds. But, in case this term is limited to one year, it will inevitably lead to a liquidity crisis and a drop in inventory. If the payment period is from two to five years, the industry can expect a decline in prices for diamonds in the range of 5% - 10%.
In turn, a number of diamond producers see a positive component in the lack of bank funds, which may follow the closure of ADB. In their opinion, such a situation could put an end to the speculative trade in rough diamonds, which dealers conduct in Antwerp.
It is believed that the diamond trade has not yet received raw materials worth more than $ 200 billion, which are specially held by dealers to create an artificial deficit on the market in order to manipulate prices.
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