NEW DELHI(BullionStreet): World's largest gold consumer India enacted a law making it mandatory for jewellers to collect a KYC (know your customer) document from every customer purchasing jewellery worth Rs 50,000.
India made an amendment to extend the purview of the Prevention of Money Laundering (PML) Act to enforce Know Your Customer norms for retail purchases of gold and precious stones.
Indian authorities hope this move will eventually cut down gold imports which is responsible for country's staggering current account deficit (CAD).
Analysts said jewellery stocks have already weakened by around 25% from peak levels on fears of regulatory policy changes that will curb the surge in gold demand.
They believe this amendment will significantly curtail the unreported cash transaction in bullion trade and curtail overall imports, which on a five year average, have stood at 71 percent of the country's CAD.
Retail jewllers say they expect some resistance from customers.They added that though the move will turn out to be negative for jewellery stocks in the short term, but will help clean up the industry.
Implementation of the KYC norms is expected to arrest rampant sales tax evasion that is prevalent in some states across the country.
All India Gems and Jewellery Trade Federation said it was an impractical idea, as every 15 grams jewellery purchase would invoke the KYC norms at the current price of gold.
According to the new norm, anybody found guilty of money laundering shall be liable for imprisonment which shall not be less than three years, but may extend to seven years, and will also attract a fine.
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