Current · Source: Reserve Bank of India · RBI/2010-11/514 · issued 06 May 2011 · ~2 min read
Quick answerRBI has restricted Suppliers’ and Buyers’ credit, including LC usance, for rough, cut and polished diamond imports to a maximum of 90 days from shipment date, effective immediately. AD Category-I banks must enforce KYC/AML norms and scrutinise unusual volume spikes.
The rule, in the simplest words
Banks must make sure that loans for buying diamonds from other countries (called trade credit) are paid back within 90 days from when the diamonds are shipped.
This rule covers all types of diamond imports: rough (uncut), cut, and polished diamonds.
Banks have to check customers carefully (KYC/AML rules) and watch for any sudden big jumps in diamond buying, which might be used to cheat the system.
The 90-day limit already existed for metals like platinum and silver; now it also applies to diamonds.
How it plays out — a real example
A KYC & compliance officer in Surat reviews a new letter of credit (LC) for a diamond importer. She notices the importer wants a 120-day payment term for rough diamonds. She explains the new RBI rule and adjusts the LC to 90 days from shipment, ensuring the bank stays compliant and the importer plans faster payment.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/514
A.P. (DIR Series) Circular No. 59
May 06, 2011
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Foreign Exchange Management Act, 1999 –
Import of rough, cut and polished diamonds
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the A.P.(DIR Series) Circular No.12 dated August 28 ,2008 , in terms of which AD Category – I banks were permitted to approve Suppliers’ and Buyers’ credit (trade credit), including the usance period of Letters of Credit for import of platinum, palladium, rhodium and silver for a period not exceeding 90 days from the date of shipment .
2. In the context of recent developments, it has been decided that Suppliers’ and Buyers’ credit (trade credit) including the usance period of Letters of Credit opened for import of rough, cut and polished diamonds should not exceed 90 days from the date of shipment. The revised directions will come into force with immediate effect.
3. AD Category – I banks should ensure that due diligence is undertaken and Know-Your-Customer (KYC) norms and Anti-Money Laundering (AML) standards, issued by the Reserve Bank are adhered to while undertaking the import transactions. Further, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are bonafide and are not intended for interest/currency arbitrage. All other instructions relating to imports of rough, cut and polished diamonds shall continue.
4. The earlier instructions issued for direct import of gold vide A.P.(DIR Series) Circular No.2 dated July 9,2004 , import of platinum / palladium/ rhodium /silver vide A.P.(DIR Series) Circular No.12 dated August 28,2008 and advance remittance for import of rough diamonds, vide A.P.(DIR Series) Circular No. 21 dated December 29,2009 shall remain unchanged.
5. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this circular have been issued under Section 10 (4) and Section 11 (1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Meena Hemchandra)
Chief General Manager in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/514 · issued 06 May 2011. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (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), your first concrete step on “RBI caps diamond import trade credit at 90 days” is: “Update internal trade credit policies to enforce 90-day maximum for diamond imports (rough, cut, polished).” (RBI issued this 06 May 2011).
Circular: RBI/2010-11/514 -- RBI caps diamond import trade credit at 90 days
Issued: 06 May 2011
Action required: Update internal trade credit policies to enforce 90-day maximum for diamond imports (rough, cut, polished).
Action required: Review existing LCs and credit lines for diamond imports to ensure compliance with the new tenor cap.
Action required: Strengthen KYC/AML checks and monitor for abnormal volume increases in diamond trade transactions.
Action required: Communicate the revised instructions to all concerned customers and constituents immediately.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6390&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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