RBI's Credit Limit Troubles Diamond Units

RBI-logoSurat: At least 350 small and medium diamond companies in the world’s biggest diamond cutting and polishing centre in Surat are facing severe financial problems with Indian banks strictly implementing the 90 days credit limit for overseas payment to rough diamond dealers in Antwerp and Dubai for the past four months, reports The Times of India.

The Gem and Jewellery Export Promotion Council (GJEPC) and the Surat Diamond Association (SDA) have urged the Central and the state governments to increase the credit limit for payment up to 245 days.

As per a circular by Reserve Bank of India (RBI), the payments due to the overseas buyers must be done within 90 days and the banks were strictly asked to turn down payments beyond 90 days.

The diamantaires, who import rough diamonds from Antwerp and Dubai on credit, now have to compulsorily make payment within 90 days as per the RBI circular.

While around 70 per of rough diamonds are imported from top mining companies like De Beers, Alrosa and Rio Tinto by the big diamond companies having credit lines with the Indian banks, it is the small and medium diamantaires who have to depend on rough diamond traders in Antwerp for their direct supplies. It is estimated that around $5 billion worth of rough diamonds are imported from Antwerp per annum.

It is a practice in Antwerp where rough diamond dealers offer goods to Indian diamantaires on 180 days credit limit. Usually, the processing of the rough diamonds and their marketing take around 120 to 130 days from the time when the shipment arrives in Surat.

The diamantiares have been questioning the 90 days credit limit offered by the RBI by saying that the diamonds pass through various stages of manufacturing levels. Now, the diamantaires have no option but to pay from their own pockets to secure the 90 days deadline for forwarding payments to their overseas sellers from the banks.