The Reserve Bank of India has directed banks that suppliers and buyers credit, including letter of credit (LCs), extended for direct gold imports should not exceed 90 days.
Banks will now have to ascertain the credentials of a supplier before opening LCs. It will also have to examine if the financial standing, line of business and the net worth of the importer is equivalent with the volume of business turnover.
The central bank has also advised banks to co-ordinate with each other to assess business irregularities. To establish a audit trail of import/export transactions, banks will now have to preserve all documents pertaining to such transactions for at least five years.
Banks will have to ensure that all due diligence is undertaken, all know your customer norms and anti-money-laundering guidelines, are adhered to while undertaking such transactions, said the RBI.
Any large or abnormal increase in the volume of business of the importer should be closely examined to ensure that the transactions are genuine, it added.
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