MUMBAI Dec 12 Axis Bank Ltd, India's
top importer of gold, has suspended the bank accounts of some
bullion dealers and jewellers after two of its executives at a
branch were arrested over alleged money laundering.
The move is likely to curtail imports by the world's
second-biggest gold consumer this month and could weigh on
global prices already near their lowest level in ten
"We have temporarily suspended transactions in a few current
accounts as a part of a larger enhanced due diligence exercise
being conducted on transactions post-demonetisation," the bank
said in an e-mailed reply to questions from Reuters.
Prime Minister Narendra Modi scrapped 500-rupee and
1,000-rupee banknotes on Nov. 8 in a bid to flush out cash
earned through illegal activities, or earned legally but never
disclosed to tax authorities.
There have also been reports of people rushing to buy gold
by paying as much as a 50 percent premium above official prices
using their unaccounted money to skirt the note ban.
Axis did not directly comment on the arrests. Last week the
Enforcement Directorate, a government agency that fights
financial crime, said it had arrested two Axis bank employees
for allegedly helping launderers to buy gold with the help of
The bank said the suspended gold dealers' accounts will be
restored over the next few days after an "enhanced due diligence
A Chennai-based bullion dealer, who declined to be named,
said the bank had frozen his account without giving a reason.
Half a dozen other dealers in Kolkata, Mumbai, Ahmadabad and
New Delhi also confirmed the freezing of their Axis accounts.
The move has brought bullion trading to a standstill, with
jewellers fearing attention from government agencies if they
make large purchases, said Harshad Ajmera, the proprietor of JJ
Gold House, a wholesaler in the eastern Indian city of Kolkata.
It is estimated that one-third of India's annual demand of
around 800 tonnes is paid for in "black money" - the local term
for untaxed funds held in cash by citizens that do not appear in
any official accounts.
Jewellers and bullion dealers are deferring purchases and
gold imports in December could fall to 30 tonnes, down from 107
tones in the same month a year ago, said a Mumbai-based dealer.
In November the country's gold imports jumped to around 100
tonnes, the highest in 11 months.
Axis, India's third-biggest private sector bank, said last
week it had suspended 19 employees over alleged breaches at one
of its branches in implementing a government-ordered exchange of
high-value bank notes.
(Reporting by Rajendra Jadhav and Devidutta Tripathy; Editing
by Tom Hogue)