NBFCs: Bullion Dealers & Jewelers Now High-Risk KYC Accounts
Current · Source: Reserve Bank of India · RBI/2010-11/419 · issued 08 Mar 2011 · ~1 min read
Quick answerRBI mandates NBFCs to classify bullion dealers and jewelers as high-risk customers, requiring enhanced due diligence and intensified transaction monitoring under PMLA obligations.
The rule, in the simplest words
NBFCs (companies that lend money but are not banks) must now treat bullion dealers (people who buy/sell gold bars) and jewelers as 'high-risk' customers.
For these high-risk customers, NBFCs have to do extra checks (enhanced due diligence) to make sure they know who they are dealing with.
NBFCs must watch these accounts more closely (intensified transaction monitoring) to catch any suspicious money movements.
If NBFCs see anything suspicious in these accounts, they must report it to the government's financial crime agency (FIU-ND).
If NBFCs don't follow these rules, they can be fined under the PMLA (money-laundering law) and RBI Act.
How it plays out — a real example
Priya, a compliance officer at a mid-sized NBFC in Surat, updates her bank's system to flag all jeweler accounts as high-risk. Now, when a local bullion dealer makes a large cash deposit, her team automatically runs extra checks and monitors the transaction pattern more closely, ensuring they file a report if anything looks odd.
What changed
RBI modified the July 2010 KYC/AML master circular for NBFCs. Bullion dealers and jewelers must now be categorized as high-risk customers. These accounts require enhanced due diligence and intensified transaction monitoring for suspicious activity reporting.
What it means for you
NBFCs must update their KYC risk classification frameworks to include bullion and jewelry sectors as high-risk. This increases compliance costs and monitoring intensity for these accounts. Failure to comply may attract penalties under the PMLA and RBI Act.
What you must do
Update internal KYC policies to classify bullion dealers and jewelers as high-risk customers.
Apply enhanced due diligence measures for all such accounts, including sub-dealers.
Implement intensified transaction monitoring for these high-risk accounts.
Ensure suspicious transaction reports (STRs) are filed with FIU-ND for any suspicious activity in these accounts.
Who it affects
All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs), Compliance and KYC teams at NBFCs, Bullion dealers and jewelers as customers
❓ Common questions
Why are bullion dealers and jewelers now classified as high-risk?
RBI considers cash-intensive businesses like bullion and jewelry as inherently higher risk for money laundering, requiring enhanced due diligence.
What specific monitoring is required for these high-risk accounts?
NBFCs must apply intensified transaction monitoring and file Suspicious Transaction Reports (STRs) to FIU-ND for any suspicious activity in these accounts.
What are the penalties for non-compliance with this circular?
Contravention or non-compliance attracts penalties under the relevant provisions of the RBI Act, 1934 and the Prevention of Money-laundering Rules, 2005.
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/419
DNBS. (PD) CC No 212/03.10.42/2010-11
March 8, 2011
Dear Sir,
All Non-Banking Financial Companies,
Residuary Non-Banking Companies
Dear Sir,
Know Your Customer (KYC) norms /Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT) Obligation of NBFCs under PMLA, 2002
Please refer to the Master Circular No. 184 dated July 01, 2010 on the captioned subject. All NBFCs (including RNBCs) are advised to take note of modifications to the above circular as under:
2. Reference has been invited to para 2 of Annex VI of the Master Circular No. 184 dated July 1, 2010. NBFCs are required to apply enhanced due diligence measures on high risk customers. Some illustrative examples of customers requiring higher due diligence have also been given in the paragraph under reference. NBFCs have been further advised that in view of the risks involved in cash intensive businesses, accounts of bullion dealers(including sub-dealers) and jewelers should also be categorized by NBFCs as ‘high risk’ requiring enhanced due diligence.
3. In terms of paragraph 4 of Annex-VI of the Master Circular No 184 dated July 1, 2010, ongoing monitoring is an essential element of effective KYC procedures. It is advised that NBFCs are also required to subject these ‘high risk accounts’ to intensified transaction monitoring. High risk associated with such accounts should be taken into account by NBFCs to identify suspicious transactions for filing Suspicious Transaction Reports (STRs) to FIU-ND.
4. These guidelines are issued under Section 45K and 45L of RBI Act,1934 read with Rule 7 of Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 and any contravention thereof or non-compliance shall attract penalties under relevant Act / Rules.
Yours sincerely,
(Uma Subramaniam)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/419 · issued 08 Mar 2011. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All Non-Banking Financial Companies (NBFCs), Residuary Non-Banking Companies (RNBCs), Compliance and KYC teams at NBFCs, Bullion dealers and jewelers as customers), your first concrete step on “NBFCs: Bullion Dealers & Jewelers Now High-Risk KYC Accounts” is: “Update internal KYC policies to classify bullion dealers and jewelers as high-risk customers.” (RBI issued this 08 Mar 2011).
Action required: Update internal KYC policies to classify bullion dealers and jewelers as high-risk customers.
Action required: Apply enhanced due diligence measures for all such accounts, including sub-dealers.
Action required: Implement intensified transaction monitoring for these high-risk accounts.
Action required: Ensure suspicious transaction reports (STRs) are filed with FIU-ND for any suspicious activity in these accounts.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6278&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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