State of Bank of India (SBI) is the first Indian lender to frame a policy to fund makers of lab-grown diamonds which come across as replicas of the natural stones, but are often looked at with suspicion by high-street banks and scoffed at by many traditional diamantaires.
Reflecting the slow shift in the diamond trade, the decision by the country’s largest bank comes amid some of the jewellers putting up factories in Surat to produce synthetic diamonds and many diamond houses considering relocating from the financial capital Mumbai to the southern Gujarat town, which for decades has been the hub of diamond cutters and polishers.
The bank’s operational guidelines for financing man-made diamond houses include the standard prudential practices like "treating non-fund limits at part with funded limits", critically looking at the "dependency on single buyer as percentage of annual sales", obtaining business credit report on overseas buyers from agencies like Dun & Bradstreet, and getting hold of audited balance-sheet of buyers which are house companies and foreign clients.
Very little would be disbursed as working capital. To begin with, (SBI's) Diamond Bourse branch in Mumbai Bandra Kurla Complex and the Commercial branch in Surat have been identified for the business. Also, borrower's exposure to foreign currency has to be fully hedged except where natural hedging is available, the source shared.
Synthetic diamonds generally cost 30-40 per cent less than the natural (or, earth-mined) diamonds. These were first manufactured by
General Electric in the 1950s.
While the local production capacity for lab-grown stones is not available, apex industry body Gem & Jewellery Export Promotion Council’s (GJEPC) data showed that $358.3 million worth 'rough (or unpolished) lab-grown diamonds' were imported between April and June 2022, up from $255.9 million in the corresponding period of 2021.