The State Bank of India (SBI), one of the world’s top two diamond industry lenders, announced its intention to proceed “with caution” as it assesses overdue debts by a dozen Indian diamond firms, based in Surat, amounting to $452 million.



One of the diamond firms, JB Diamonds, has recently defaulted on its debts, to the toll of $180 million; however, a SBI’s diamond division source told IDEX Online that the bank had yet to rectify its overall attitude and policies, in respect to the diamond industry.



“We assess each business separately and so we’re not backing away from those businesses that are run properly. Caution is the watchword for banks with all industries and not just diamonds after the recession,” the source said, adding, “right now, we know that many of these units are under stress.”



Diamond industry analysts believe some of the companies suffering debt reached their condition due to expansion into other businesses like real estate, the stock market, oil and other mining sectors with bank funds meant for their diamond businesses alone.



Analysts also believe that the diamond businesses in question suffered as a result of the hit taken by non-diamond businesses the firms were invested in. SBI’s lack of a dedicated relationship banking division focused on the diamond sector alone is cited as one of the reasons why early warning signals of this were not picked up.