As per RBI Circular, Bank can open Letters of Credit and allow remittances on behalf of EOUs, units in SEZs in the Gem & Jewellery sector and the nominated agencies / banks, for direct import of gold, subject to the following

1. The import of gold should be strictly in accordance with the Foreign Trade Policy.
2. Suppliers Credit and Buyers Credit, including the usance period of LCs opened for direct import of gold, should not exceed 90 days.
3. Banker’s prudence should be strictly exercised for all transactions pertaining to import of gold. Bank would ensure that due diligence is undertaken and all Know Your Customer (KYC) norms and the Anti-Money-Laundering guidelines, issued by Reserve Bank from time to time are  adhered to while undertaking such transactions. Bank would closely monitor such transactions. Any large or abnormal increase in the volume of business of the importer should be closely examined to ensure that the transactions are bonafide trade transactions.
4. In addition to carrying out the normal due diligence exercise, the credentials of the supplier should also be ascertained before opening the LCs. The financial standing, line of business and the net worth of the importer customer should be commensurate with the volume of business turnover. Apart from the above, in case of such transactions banks should also make discreet enquiries from other banks to assess the actual position. Further, in order to establish audit trail of import/export transactions, all documents pertaining to such transactions must be preserved for at least five years.
5. Bank would follow-up for submission of the Bill of Entry by the importers as stipulated.

In a clarification circular issued by RBI, even on jewellery, tenure for buyers credit has been restricted to tenure of 90 days.

Reference 

1. RBI Circular : Fema 1999 – Import of Gold in any form including Jewellery – Clarification: Dated: 24-09-2012
2. RBI Master Circular on External Commercial Borrowing (ECB) and Trade Credit: Dated: 01-07-2014
3. RBI Master Circular on  Import of Goods and Services: Dated: 01-07-2014