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To an industry that was making all efforts to put a brave front in trying times, a small jolt might also prove to be harmful. While the solo incident of a renowned bank snapping its finance facilities to a big business house in Belgium, might be a slight tremor, but it definitely had a dominos effect that led various companies switch to alert mode. With a hugely positive 2013 ahead, companies were more focused to shape their business and pay attention to the market that is switching gears. In such time when the businesses are infused with positive energies after a long lull period, any big or small negative incident might have huge impact. This incident has been a learning incident for the diamond industrialists and the banks. It can also be said that many players in the industry are now examining other avenues to source finances. But many believe even before the incident happened, companies were exploring options and they would continue doing so in future. Preeti Srivastav talks to the industry insiders, who speak their minds about various apprehensions and probabilities in wake of such incident.
By: Diamond World News Service
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Feb 16 2013 4:39PM
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Reference: 7611  

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Though it is said that diamond industry is a highly secure industry and is not too prone to losses, it is important to keep in mind a recent incident (of finance services to Arjav Diamond Unit being discontinued by ABN Amro Bank) which proves that it has its own insecurities too. To begin with was the damp business year that witnessed much turbulence in the prices (of both rough and polished diamonds), business, mining and almost every other aspect that forced the businesses to slip into retrospective mode. Next, while the industry pundits predicted a good year, the business houses shifted gears to match pace and make up for their ‘less profits’ by doing a heart-full of business. While market was inching towards positivity, an unfortunate incident in Belgium forced the diamantaires to take note of something that they have been not too worried about—their relationship with the banks.

While a few feel that it requires immediate attention and every business must take a second look on their relation with their banks to avoid any unfortunate events, many others think it’s just one incident and things have been fine otherwise and they cannot allow one odd incident to dampen their spirit.

While getting a clearer picture is difficult, the incident has definitely forced both the diamond industry and the banking sector to take note of it and do some introspection. While this does not, in any way, affect the dependency of both the entities on each other, however, it may possibly lead to some changes in policies, approach and relationship. For the thumb rule in diamond industry is ‘trust’, while banks are more professional and depend on deals signed in black and white.

Post the event, we tried talking to a few industry insiders and get their take on the big picture, and a unanimous opinion was that though the incident is an unfortunate one but given the rarity of the event, it cannot be expected from the business or banks to revise their policies and relationship. Diamantaires believe that it is a secure bond that has come of age after spending years working with each other and one odd incident cannot force the parties to take a second thought.

Sanjay Shah of Gold Star Diamonds has a different opinion than the majority. He stresses that the industry needs to mend its ways before banks get reluctant in investing in the diamond business.

“A reality check, introspection and confession by each company can prove that the industry is equally responsible for such an unfortunate happening that not only put one company or bank in a piquant situation, but also tarnishes the image of the diamond industry as a whole. Many new banks are trying to enter the market, which would open new options for the businesses and ease out the pressure on existing banks, but after the Belgium event, they are too cautious. The existing players are also worried about their money,” he states.

He further explains an important fact about the diamond industry. “It is vital to remember that we get loans at low interest rate, many business houses are procuring loan amount by showing fictitious turnover, which is not a difficult task given the product that we deal in. However, the loan procured is actually used in other businesses rather than diamonds. This is a huge concern for both the banks and the industry.”

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