 "Antwerp Diamond Bank closure: Diamond traders fear liquidity crunch")
According to Belgium-based traders, of ADB’s total global operations worth $1.6 billion, roughly $1.2 bn worth were from Antwerp. The rest were spread across branches in other parts of the world, including Hong Kong and India. And, of its total operations, about 60 per cent of it was being serviced to diamond traders of Indian origin.
In India, ADB is learnt to have had direct financing worth $200-230 million (Rs 1,200-1,400 crore) through its Indian branch. Hence, with the possibility of ADB demanding a short window for repayments, an immediate liquidity crunch among diamond traders, especially those based out of Mumbai and Surat, is being feared.
“Now that the group has decided to wind down its business, diamond traders might be required to fulfilling their lending obligations with the bank’s India branch within a short period,” said Vipul Shah, chairman of the Gems and Jewellery Export Promotion Council.
However, according to an Antwerp-based trader of Indian origin, the bank has officially not announced a repayment schedule. “But, if the schedule is fixed at one year, there will be an immense liquidity crisis and also result in a fall in stock keeping capacity,” the trader said on condition of anonymity. He added current accounts with ADB were likely to be closed by December and the offices abroad might be closed by 2015.
In the wake of a possible short repayment schedule, bodies such as GJEPC are expected to meet ADB officials. “We will hold meetings with the bank officials this week to seek more time,” assured Shah, “since this will impact the diamond industry’s liquidity in the immediate run.”
“ADB has the largest share of banking business among the diamond trading community. The exposure among Surat-based traders is much less. Yet, there will be an impact on liquidity, since the business relationship with the bank helped traders here in their import and export of rough and polished diamonds,” said Dinesh Navadiya, president of the Surat Diamond Association. the city is the hub of the trade.
If the repayment schedule is anywhere less than two to five years, the industry also anticipates a fall of five to 10 per cent in polished diamond prices. On the positive side, with the dependency on low interest of four per cent financing from ADB reducing among global diamond traders, margins are set to improve. “Margins were being compromised in favour of low interest finance. Now that diamond traders will have to do business through their captive capital, we will not compromise on margins” the Antwerp-based trader said.