Public sector bank heads can now request look-out circulars against defaulters

Back in March, former Minister of State for External Affairs M.J. Akbar disclosed in Parliament that as many as 31 business people facing a CBI investigation have flown the coop so far, including many that had defaulted on bank loans. The list not only includes current headline-hoggers like Nirav Modi, Mehul Choksi and Vijay Mallya, but also long-forgotten names like Pushpesh Kumar Baid and Ashish Jobanputra.

In an attempt to step up proactive vigilance and prevent wilful defaulters and fraudsters from fleeing the country, the government has now empowered CEOs of public sector banks (PSBs) to request for issuance of look-out circulars (LOCs) against suspects, even before enforcement agencies file FIRs against them.

Following the recommendation of an inter-ministerial panel under Financial Services Secretary Rajiv Kumar, the Ministry of Home Affairs (MHA) last month revised its 2017 guidelines to include heads of PSBs - the chairman or managing director and CEO - to the list of officials who can make requests for LOCs. The panel had been set up to look into various issues, including how to put a check on wilful defaulters-turned-wannabe fugitives.

According to Business Standard, previously only the likes of the Central Bureau of Investigation (CBI), Directorate of Revenue Intelligence, Research and Analysis Wing, designated officers of Interpol and the Enforcement Directorate (ED) were empowered to place a request for the issuance of LOC as per the MHA's guidelines.

Once the MHA receives such a request, it issues the LOC to all immigration check points of airports across the country. The guidelines, issued last December, allowed immigration authorities to deny departure to a person seen as "detrimental" to the "economic interests of India".

"It will act as a big deterrent for wilful defaulters and also bring about fundamental change in the creditor-debtor relationship," Kumar told PTI. In the heels of the PNB fraud, the Finance Ministry had asked PSBs to collect passport details of all the borrowers who had taken loans exceeding Rs 50 crore.

However, according to Kumar, mere possession of passport details was not enough and this latest move will now allow banks to swiftly take decisive action against wilful defaulters and thwart any attempts to flee the country.

The Department of Financial Services has also issued an advisory to the heads of all PSBs to take note of the changes in the circular.

With PTI inputs