Fearing possible involvement of illicit money in dealings by jewellers and bullion dealers, the Reserve Bank of India has asked non-banking financial companies (NBFCs) to treat such entities as "high-risk" and be extra cautious while undertaking transactions with them.
RBI’s directive to NBFCs follows similar guidelines announced for banks in January . The transactions by jewellers and bullion dealers are highly cash-intensive in nature and it is feared they could be used for flowing in black money into the banking system. Also, these entities prefer doing business with NBFCs as the regulatory framework for them is considered less strict.
Now, NBFCs would also have to conduct a stricter due diligence before opening accounts for such entities and subject their transactions to a strict monitoring process.
In a circular dated March 8, RBI said it was modifying the master circular for KYC (Know Your Customer) norms and anti-money laundering standards/combating of terror financing obligations of NBFCs to classify bullion dealers and jewellers as "high-risk."
Both banks and NBFCs would also need to immediately inform enforcement agencies about any suspicious activities in the accounts of these entities. Non-compliance to the guidelines would attract hefty penalties.
