The recent US economic crisis is affecting the borrowings by small and medium diamond exporters. These traders usually look at borrowings at a higher spread over the London inter-bank offered rate (libor) to finance their imports of rough diamonds, as reported in the media. They are now negotiating with the Commerce Ministry and RBI, to increase the cap on borrowing costs, which will assure them a steadier supply of dollars. With the current shortage of USD, the traders are not too keen on rupee loans.%% The dollar loan, which the exporters currently seek, is referred to as the packing credit and foreign currency (PCFC) loan at libor plus a spread of one percent, and is used for import of raw materials. The reason this is preferred by the diamond industry is because the servicing charge is more cost effective than a rupee loan. %% The US crisis has demotivated the small traders as banks are not encouraging them, despite they agreeing to pay a higher rate of interest to borrow dollars. They are now being forced to access rupee loans, a more expensive affair. The shortage of USD in the Indian market has been affected by withdrawal of foreign support in Indian markets, and foreign banks are purchasing dollars to fund their overseas ventures in non-deliverable forwards (NDF) market and benefit from the price differential between the domestic and offshore forex markets. Also, oil majors are seeking the dollar funds to support imports in the times of volatile oil prices, which has also led to the dollar shortage. %% In this picture, the bigger exporters with much liquidity in hand have the option to look at other funding sources. Untill recently, banks were refusing to offer PCFS loans, although some banks have agreed to extend the PCFC dollar-denominated loan tot he small traders and the diamond industry is appealing to the RBI to introduce reforms that can sustain the requirements of small and medium exporters.