Industry News by Nemesis

RBI Relaxes Credit Terms on Diamond Imports

April 4, 2016

The Reserve Bank of India (RBI) has allowed authorized dealer banks to extend the period for which “clean credit” can be provided for rough and polished diamond imports, the Gem and Jewellery Export Promotion Council (GJEPC) reported.

Clean credit refers to a loan provided by a foreign supplier to its Indian customer for importing diamonds without formal guarantees such as a letter of credit or undertaking by an Indian financial institution, GJEPC explained. Under the new rules, credit can be given for more than 180 days from the date of shipment, whereas previously there was a 180-day restriction on the timeline. 

“GJEPC has been asking the government for some relaxation in this regard,” said Ajesh Mehta, convener of the GJEPC’s banking, insurance and taxation sub-committee. “It is a very positive [decision] for the diamond industry, particularly in the current market scenario.” 

As part of its decision, RBI asked that banks meet certain conditions, including extension being granted on the grounds of financial difficulties or quality disputes. Moreover, the importer should not be under investigation and late payments should not be a frequent occurrence. Also, no interest payment should be payable for the additional period.

The decision comes as international banks are rethinking their lending policy to the diamond industry. Standard Chartered is demanding clients in India and Belgium provide greater loan protection or collateral against business loans, Bloomberg reported. 

The Antwerp World Diamond Centre (AWDC) reported that it discussed the previous limitation in a meeting with India's Prime Minister Narendra Modi during his recent state visit to Belgium. Ari Epstein, chief executive officer of the AWDC, said the decision will help strengthen trade relations between the Antwerp and Indian diamond industries.

 

Source: Rapaport

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