The Reserve Bank of India (RBI) has eased restrictions on letters of credit (L/Cs) for the import of diamonds.

The new rule is effective immediately.

Trade credit

India's central bank has now allowed lenders to extend trade credit for imports or issue import L/Cs for a period of 180 days from the date of shipment.

Relaxation of the trade credit and L/C restrictions follow representations made to the RBI by India's Gems and Jewellery Export Promotion Council (GJEPC).

Due diligence

However, the central bank cautioned that banks should ensure that necessary due diligence is undertaken during such import transactions.

In response to this caution, the banks and GJEPC have agreed to work closely together to improve due diligence (DC World News, 11 July 2014).

Tenor extension

Last year, the RBI imposed tougher limits on L/C tenors for imports of precious and semi-precious stones (DC World News, 25 February 2013).

India's banks were told that a maximum 90-day tenor would apply to L/Cs used for imports of precious and semi-precious stones.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.