RBI Eases Norms for Diamond Imports

Mumbai: The Reserve Bank of India (RBI) allowed banks to approve clean credit facility given by foreign supplier to Indian importers of rough, cut and polished diamonds, even beyond 180 days. “To ease the operational difficulties faced by importers, it has been decided, in consultation with the Government of India, to delegate the powers for permitting such clean credit for a period exceeding 180 days from the date of shipment to the AD banks,” RBI said in notification in relation to import of rough, cut and polished diamonds.

At present the banks are permitted to approve clean credit to Indian importers for import of rough, cut and polished diamonds, for a period not exceeding 180 days. Clean credit is a loan given by a foreign supplier to its Indian customer/buyer, without any Letter of Credit (Suppliers’ Credit) / Letter of Undertaking (Buyers’ Credit) / Fixed Deposits from any Indian financial institution for importing diamonds.

These new norms for allowing clean credit are enforced with immediate effect. However, the banks should do the due diligence before approving such clean credit facility for more than 180 days period. Before approving the clean credit, the banks will need to ensure the genuineness of the reason and bonafides of the transaction and also that no payment of interest is involved for the additional period. Banks must also make sure that importer requesting for the extension is not under investigation by authorities.

The importer should also not be a frequent offender. RBI further said that banks should ensure that due diligence is undertaken and Know-Your-Customer (KYC) Norms and Anti-Money Laundering (AML) Standards, issued by it are adhered to while undertaking the import transactions. Also, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are bonafide.