India abolishes tight controls over rough diamond imports
RBI eases norms for diamond importers, paving the way for increasing rough diamond purchases from more miners abroad.
The Reserve Bank of India (RBI) recently relaxed rules concerning the process of importing rough diamonds. The new set of rules brought a fresh air for country traders and manufacturers as it would allow them to import rough diamonds from anywhere in the world.
Earlier bank could only finance Indian importers with advance remittances to a limited group of global rough miners, including De Beers, Rio Tinto, Alrosa, BHP Billiton, Endiama, Russia’s State Precious Metals and Gems Repository, etc.
The payments were in exchange of rough diamond parcels, and the expenditures were without any limit and without a bank guarantee or a standby letter of credit. Previously, norms detailed that the finance would only be to notified mining companies by an importer, other than a public sector company or a department.
The RBI new norms, means the apex bank would not specify the names of foreign mining companies from which importers may import roughs. The central bank has said that banks may use their own discretion to extend advance remittance to Indian importers in favour of global miners.
“Based on recommendations from the Gems and Jewellery Export Promotion Council, RBI had in 2007 notified five global miners of roughs, including Diamond Trading Company, UK; Rio Tinto, UK and BHP Billiton, Australia, to which an importer was allowed to make advance remittance,” said Shreyas Doshi, chairman of diamond house, Shrenuj & Company. Doshi added that the number was later extended to nine, including Alrosa and Gokharan from Russia and Endiama EP from Angola.
The regulator has, however, currently restricted remittances to mining companies holding a certification from the Kimberly Process Certification Scheme, established in 2003 by the United Nations, to prevent diamond sales from financing war or human rights abuses. For public sector undertakings, banks have been permitted advance remittance with a specific waiver of bank guarantee from the Ministry of finance, where the advance payment is equivalent to or exceeds $100,000. Banks are to report all advances of over $5 million within 15 days of every six months, the RBI has noted.
The RBI’s move would help small and medium diamantaires to freely import rough diamonds from mines anywhere around the world, said Dinesh Navadia, of the Surat Diamond Association. He added that Indian diamantaires could now look at Zimbabwe, Angola, Tanzania, South Africa and other African countries for purchasing diamonds.