Jewellers rejoice at RBI relaxation

RBI asked banks to re-allocate export credit in foreign currency, based on a bank's policy to cover currency fluctuations

The Reserve Bank of India (RBI) has relaxed foreign currency lending norms for jewellery exporters. It has asked banks to re-allocate export credit in foreign currency, based on a bank's policy to cover currency fluctuations. This may either raise or lower the rupee equivalent of the foreign currency component of export credit.

Alternatively, banks may denominate the foreign currency component of export credit in foreign currency to ensure exporters are insulated from rupee fluctuations. The foreign currency component sanctioned, disbursed and due would be maintained in foreign currency. To record foreign currency assets on bank books, the current exchange/Foreign Exchange Dealers' Association of India rates may be used.

The relaxation came amid complaints by jewellers they were unable to meet export commitments due to the rupee's steep fall against the dollar. As a result of the fall, jewellery exporters' credit limit was also squeezed, as this limit is sanctioned in foreign currency, depending on borrowers' financing capability, export volume, annual turnover, etc.

"There will be no impact on jewellery business, as the practice has already been followed by banks today. There is nothing new in RBI guidelines," said Vipul Shah, chairman, Gems and Jewellery Export Promotion Council.