(IDEX Online News) – Some small and medium-size Indian diamond firms could be in danger of defaulting on payments due to the weakness of the rupee against the US dollar.

 

The rupee's decline has led to a sharp decrease in money circulation in diamond markets as traders have cut back on dealing in polished diamonds since payments have to made in rupees, The Times of India reported.

 

Surat Diamond Association President Dinesh Navadia said, "Many small and medium manufacturers largely rely on the domestic market and sell in rupees and most do not have dollar accounts and are forced to convert to the local currency. The diamantiares are paying one percent interest on the total value of rough diamonds to delay payments by one month rather than paying the difference amount of 8 percent on the dollar."

 

The newspaper cited sources as saying that the credit lines of big diamond firms with the leading banks have been reduced by 10 percent as a result of the weak rupee.

 

The rupee fell to a new record low on Thursday to almost 60 to the US dollar.

 

The Times of India described the rupee as "the most battered" of the Asian currencies and its decline is due to India's "significantly larger current account deficit".