What changed
Previously, trade credit for diamond imports had no specific tenor cap under this circular. Now, RBI has explicitly capped Suppliers’ and Buyers’ credit (including LC usance) for rough, cut and polished diamonds at 90 days from shipment date. The earlier 90-day limit for platinum, palladium, rhodium and silver remains unchanged.
What it means for you
Banks handling diamond import trade finance must ensure all new LCs and credit facilities for rough, cut and polished diamonds do not exceed 90 days usance. This tightens working capital cycles for diamond traders and may increase demand for alternative financing. Banks must also step up due diligence to prevent misuse for arbitrage.
What you must do
- Update internal trade credit policies to enforce 90-day maximum for diamond imports (rough, cut, polished).
- Review existing LCs and credit lines for diamond imports to ensure compliance with the new tenor cap.
- Strengthen KYC/AML checks and monitor for abnormal volume increases in diamond trade transactions.
- Communicate the revised instructions to all concerned customers and constituents immediately.
Who it affects
AD Category-I banks handling import trade credit for diamonds, Diamond importers and exporters using suppliers/buyers credit or LCs, Trade finance and compliance teams in banks
Does this 90-day cap apply to all types of diamonds?
Yes, the circular covers rough, cut and polished diamonds. The same 90-day limit from shipment date applies to all three categories.
Are there any exceptions or grandfathering for existing LCs?
The circular states the revised directions come into force with immediate effect. It does not provide any grandfathering clause, so banks should apply the cap to new transactions and review existing ones for compliance.
What other commodities have similar trade credit caps?
Platinum, palladium, rhodium and silver imports already have a 90-day cap under earlier circulars. Gold and rough diamond advance remittance instructions remain unchanged.