The notification issued by the apex bank says, the clean credit i.e credit given by a foreign supplier to its Indian customer/buyer, without any letter of credit/letter of undertaking/fixed deposits from any Indian financial institution for import of rough, cut and polished diamond, may be permitted for a period not exceeding 180 days from the date of shipment.
The decision has come after the diamond traders and the Gems and Jewellery Export Promotion Council (GJEPC) had met Arun Jaitley, Finance Minister to solve various issues concerning the trade, including the burning issue for the diamond traders regarding the suppliers' credit cycle.
The decision has brought relief to the diamataires. With this the traders will have enough time to process the rough diamonds and make payments to the sellers in 180 days. Commenting on the RBI decision, Rajesh Lakhani, VP- Kiran Gems said – “At the face value, it is a much awaited step for the industry. This would definitely help to ease the liquidity crunch of the manufacturers as the prior norm compelled importers to make payment within 90 days or in either case the payout request was referred to RBI for approval. This would also save a lot of time and efforts of the manufacturers.”
Earlier in 2011, the RBI had brought down the import payment credit limit for the Indian diamantaires from 120 days to 90 days. If the 90-day period got lapsed, then the diamantaires were required to get permission from the RBI to make the payment which further delayed the process. Also, currency fluctuations during this period were resulting into additional burden along with the interest cost for the diamond traders.
Apart from easing the import norms, the RBI has directed the banks to make sure that due diligence are undertaken and KYC norms and anti-money laundering standards are followed while undertaking the import transactions. Further, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are valid.