Punjab National Banks faith in the prospect of diamonds remains undeterred despite its unpleasant history with diamond traders. According to an Economic Times report, the bank is looking to support diamond houses producing lab-grown or synthetic diamonds with its new policy.
PNB’s move is a year behind State Bank of India, which has already began financing lab grown diamonds under similar conditions. IndusInd bank has also been reported to enter the sector.
The demand for LGDs is on the rise with reports forecasting the global market to grow from $19.3 billion in 2020 to $49.9 billion by 2030. India holds the leading position in processing diamonds with 90 per cent of the world’s diamond cutting and polishing units, making it the world’s largest exporter of diamonds.
With the increase in demand for LGDs, the government announced industry friendly policies to retain India’s share in the world’s diamond processing. The Union Budget 2023 policies on Lab Grown Diamonds (LGD) is favorable to its manufacturers. The finance minister Nirmala Sitharaman had announced “Customs duty on the seeds used in lab-grown diamond manufacturing will be reduced”. The announcement also included grant to IITs to grow LGDs.
LGDs are produced by two processes, either using the High-Pressure-High Temperature (HPHT) technique and Chemical Vapor Deposition (CVD). India mostly uses the CVD technique in which a vacuum chamber is filled with carbon-containing gas to crystallize a synthetic diamond seed using lower temperature and pressure in comparison to the HPHT method.
While the LGDs demand is negligible in India, 2-3 percent as reported by Business Line, the sector is established in global markets. LGDs have been commercially marketed for over 10 years in US and China markets. While LGD look identical to natural diamonds, they cost a fraction of real deal. Gems and Jewellery Export Promotion Council data reports an 8% increase in exports from Rs 779 crore to Rs 844 crore in December 2022.
PNB had been defrauded of about Rs 14,000 crore by fugitive diamond trader Nirav Modi in 2018. As a measure of precaution, under its new policy, the bank plans to provide working capital to stone makers against 100% collateral security and high internal rating A3 for Rs 50 crore loan.
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