According to Elizabeth Burden and Thomas Biesheuvel for Bloomberg, the Union Bank of India (UBI) is planning to pull out of the global diamond hub of Antwerp. The bank has given notice that it will close its branch in the Belgian city within a year, according to Chief Executive Officer Rajkiran Rai Gundyadka. "The viability of the branch isn’t established,” he said.
Diamond financing has faced significant challenges in recent years as the banks have implemented a blanket approach to 'derisking', neglecting recommendations from the Financial Action Task Force to approach it on a case-by-case study. Additionally, Bloomberg mentions the withdrawal of Standard Chartered Plc from diamond financing and the closure of the Antwerp Diamond Bank as having an impact on lending in the sector. Indian lenders had largely filled the void, they write, but earlier this year the diamond industry was hit by high-profile cases: Nirav Modi and Mehul Choksi were implicated in an alleged $2-4 billion fraud involving the use of fake guarantees from Punjab National Bank to solicit loans, a scandal that rocked India’s banking industry.
Citing Dfin - a London-based corporate finance firm specializing in the diamond sector total lending to the midstream - Bloomberg says lending to the diamond midstream has fallen from $16 billion in 2013 to just over $13 billion last year and is forecast to drop below $11 billion in the next couple of years. Whether UBI's exit from Antwerp specifically is a "blow" to the diamond capital, however, is less certain. According to an official from the Antwerp World Diamond Centre (AWDC), the representative body for the Antwerp diamond industry, while AWDC regrets the withdrawal of UBI from the industry, it will not have a significant impact on diamond financing and services in the city. The bank currently has a limited lending portfolio in the city, and the majority of the companies it services have alternative accounts elsewhere. Given the limited scope of UBI’s lending, as well as the fraud cases and non-performing loans plaguing Indian banks across multiple industries - forcing them to restructure - the AWDC expected this move was imminent.