Banks can now open and renew diamond dollar accounts (DDA) without the central bank’s prior approval, the Reserve Bank of India (RBI) said in a notification.
Earlier, DDA opening and renewal were referred by the banks to RBI. The central bank used to clear them on a case-to-case basis, which was quite time-consuming.
DDAs were opened by companies dealing in purchase or sale of rough/cut & polished diamonds or with a track record of at least three years in import/export of diamonds and coloured gemstones and having an average annual turnover of Rs 5 crore or more in the preceding three licensing years (starting April-March 2010).
DDAs should be opened as a current account in the name of the exporter and maintained in US dollars only, with no interest being paid on the balance held. While there cannot be an intra-account transfer in DDAs, an export firm cannot maintain more than five such accounts.
Similarly, the balance held under this account is subject to statutory requirements such as the cash reserve ratio and the statutory liquidity ratio. Export companies with EEFC account — in which export receivables are parked in a foreign currency to avoid exchange fluctuations — in India or overseas are not eligible to open such accounts.
An exporter can use DDA for availing post shipment and pre-shipment finance (short-term export credit) in US dollars, realisation of export proceeds from the shipments of rough, cut, polished diamonds or diamond studded jewellery and realisation of US dollars from local sale of rough, cut and polished diamonds under this account.
Among payments, an exporter could pay for import or purchase of rough diamonds, cut and polished diamonds, gem stones or plain gold jewellery from overseas or local sources from the DDA account. An export can also use DDA account to pay for the purchase of gold in US dollars and make transfers to the rupee account.
