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Indian diamond traders may get loans from Russian banks to buy diamonds from ALROSA

Indian traders who buy rough diamonds from Russian mining major ALROSA have something to cheer about.

Russian banks have started granting loans to ALROSA’s foreign clients for the purchase of rough diamonds. This will help the Indian diamond trade that is starved of bank finance post the alleged Nirav Modi scam.

The miner has also granted the flexibility to authorised Indian bulk purchasers (sightholders) to buy as low as 55% of the contracted volume so that they do not pile up inventory.

“This will definitely help those who buy rough diamonds from Antwerp. ABN Amro Bank has already reduced its financing for rough diamond purchases and cut down credit repayment period. So, if the Russian banks come forward with business-friendly lending norms, then it is good for the Indian diamond trade,” Gem & Jewellery Export Promotion Council vice-chairman Colin Shah said.

Indian banks operating in Antwerp, the hub of rough diamond trading, have either stopped diamond financing in the Belgian city or have cut down their exposure. In India, too, banks have tightened financing to the gem and jewellery sector.

According to a CARE Ratings report, bank lending to the gems and jewellery industry had declined after the alleged Nirav Modi scam came to the fore. In FY18, incremental credit growth to this industry declined by Rs 1,100 crore, and further by Rs 700 crore the following fiscal year and Rs 6,400 crore in the first six months of fiscal 2020. As of September 30, 2019, outstanding credit to the gems and jewellery industry was Rs 65,600 crore.
India is the world’s largest cutting and polishing centre for rough diamonds, and it is said that 14 out of every 15 rough diamonds in the world are polished here. More than 70% of these diamonds come to India through Antwerp. Surat is the hub for cutting, polishing in India and processing rough diamonds and 85% of the diamonds are exported to the world markets.

Talking to ET, Jim Vimadalal, the director at the India representative office of ALROSA, said the first sale of rough diamonds of the year was encouraging. “Sightholders bought well over their minimum level. First time after many months, premium have been offered on boxes.”

But he said the coronavirus attack in China was a matter of concern. “Hong Kong, China and the Far East are major markets for diamonds and these three regions constitute 30% of India’s annual diamond exports,” he said.

Diamond prices fell in 2019 as the trade faced macroeconomic uncertainty and industry-specific challenges. Demand from China was cautious amid the US-China trade war and demonstrations in Hong Kong. Manufacturers were under pressure due to excess supply, tight liquidity stemming from reduced bank credit and low-profit margins, and sluggish demand.

Courtesy: Economic Times

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