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 months.
"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.
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 scrapped notes.
The bank said the suspended gold dealers' accounts will be restored over the next few days after an "enhanced due diligence process".
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.
