Banks Issue Notice to Sell Defaulting Firm’s Asset

A consortium of Indian banks has issued a sale notice of the factory and land owned by Surat-based diamond company M/s Minestone to recover secured debts worth $6.5 million (INR 337.7 million), the Times of India reported. The consortium is led by the State Bank of India (SBI), Antwerp Diamond Bank and Royal Bank of Scotland.
The report also noted that three large diamond firms — J.B. Diamonds Ltd., Kalsaria Diamond Private Ltd. and Pankaj Diamonds — have already defaulted on total loans of $227 million (INR 11.75 billion), with J. B. Diamonds leading the pack with INR 7.75 billion, as previously reported by Rapaport News.

The auctions of Minestone’s assets would only fetch a fraction of the money owed by Indian companies while the remaining debt would have to be written off, the report quoted an unnamed banker close to the issue as saying. “Most of the assets owned by the defaulter diamond firms are purchased in the name of their friends and family members,” he said.

Bankers believe that many of the diamantaires borrowed money during the economic downturn two years ago and diverted funds to other businesses in real estate and capital markets, the report stated. More than a dozen diamond firms have defaulted on bank loans worth over $378 million (INR 20 billion) in the past two years, another unnamed bank officer told the Times of India.

The report explained that several leading public and private sector banks and foreign banks run the risk of losing their money. These include the State Bank of India, State Bank of Trivancore, Vijaya Bank, UCO Bank, IDBI Bank Limited, ING Vyasya Bank, State Bank of Hyderabad, State Bank of Bikaner, State Bank of Jaipur, State Bank of Patiala, ICICI Bank, Saraswat Co-operative Bank Limited, Union Bank of India, the Royal Bank of Scotland, Syndicate Bank and Antwerp Diamond Bank.

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