London-based Standard Chartered Bank, hit by massive losses in emerging markets, particularly in Asia and now undergoing a drastic restructuring that includes shedding 15,000 jobs and raising $5.1 billion from investors, has decided to exit the diamond finance sector, where it currently has a $2 billion portfolio.
The bank has determined that working with the diamond and jewellery production pipeline’s middle market entails risks beyond limits that it has set for itself in the restructuring process. The bank says it is working on a smooth exit procedure.
Standard Chartered’s Indian arm was part of a consortium of banks that have not been able to recover $1 billion in loans to Winsome Diamonds And Jewellery and its sister company Forever Diamonds And Jewellery. Both companies were promoted and controlled by Jatin Mehta, who now controls Singapore-based synthetic diamond producer Type IIa Technologies.
Perceiving the diamond finance segment as being extremely risky, Standard Chartered had, in March this year, asked clients to either provide payment insurance or put up 100 percent collateral.
Banks trying to recover the money loaned to Winsome Diamonds and its sister company were faced with the unwelcome news that Jatin Mehta had given up his Indian citizenship and taken a St. Kitts & Nevis passport.
Apart from Standard Chartered, the consortium of banks owed money by Winsome Diamonds include the Punjab National Bank (PNB), which has highest exposure, the Bank of Maharashtra, Canara Bank, Central Bank, Exim Bank, Oriental Bank, State Bank of Hyderabad, Union Bank, Axis Bank, Vijaya Bank, Bank of India, State Bank of Mauritius, IDBI and Syndicate Bank.