The Reserve Bank of India has relaxed its rules concerning the process of importing rough diamonds, or more commonly roughs.
Until today, an advance payment without any standby letter of credit, or bank guarantee and any restriction could only be processed to notified mining firms by the importer, besides a public sector firms, or undertaking or department of the state governments or the Union.
Therefore, the RBI will no longer list foreign mining companies which an importer will be required to import roughs using advance payments and without any bank guarantee, limit or standby letter of credit.
Nonetheless, a few conditions still stand. The RBI say the foreign mining firm should be registered with the Gems and Jewellery Export Promotion Council. The banks must also conduct transactions after being sure of the genuineness of the transaction, and based on their commercial judgement. The importer must have a good track record and be a recognized processor of roughs.
Advance payments must be treated strictly as a sale contract and be paid into the account of the ultimate beneficiary, i.e. the concerned company, and not through numbered accounts or such.
Due caution must also be done to ensure that the payment are not made for the purchase of “conflict diamonds”. This means that they must have Kimberly Certification to ensure such proceeds don’t finance human rights violations or war, reported the Business Standard.
If the importer is a government or state entity, the banks can allow an advance payment of more than $100,000, subject to special waiver of bank guarantee by the finance ministry of the union. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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