A new amendment to the MHA guidelines will allow PSBs to request a look-out circular against wilful defaulters of loansNew Delhi: A breakthrough measure taken by the government to ensure that the elopement tales of beleaguered liquor baron Vijay Mallya, diamond merchants Nirav Modi and Mehul Choksi do not get repeated has put more power in the hands of public sector banks (PSBs). The chief executives of PSBs will now be able to request a look-out circular (LOC) against wilful defaulters of loans in an effort to prevent them from fleeing the country, even before an FIR is registered against them by law enforcement agencies.
‘We don’t want to leave any window for defaulters to flee’
Senior Finance Ministry officials said that the time taken by banks to file a complaint and investigative agencies to lodge an FIR often allowed defaulters to flee, thus leaving the government red-faced. “We don’t want to leave any window for defaulters to leave the country,” said a finance ministry official. And therefore, the Ministry of Home Affairs (MHA) amended its guidelines on October 12 to include the chairman, managing director or chief executive officer of each public sector bank on the list of authorities who can issue requests for opening look-out circulars “against whom an FIR is yet to be filed.”
Constraints of the previous framework
According to the previous guidelines, only the Central Bureau of Investigation (CBI), Directorate of Revenue Intelligence, Research and Analysis Wing, designated officers of Interpol and the Enforcement Directorate (ED), among others were competent authorities to place a request for the issuance of LOC.
The MHA would then issue the LOC to all immigration checkpoints of airports across the country. The guidelines, issued in December 2017, had “in the larger public interest” allowed immigration authorities to deny departure to a person seen as “detrimental” to the “economic interests of India”.
Changes have been made at the behest of a special committee
The move follows recommendations made by a committee headed by Financial Services Secretary Rajiv Kumar in a meeting held earlier this year after Modi and Choksi had eloped days before their names surfaced in a Rs 143-billion Punjab National Bank fraud. Among the recommendations made by the panel were changes to the Passport Act, 1967 to ensure borrowers are stopped from fleeing and asked to participate in the resolution of a default loan account “over a reasonably prescribed limit.”
PSU Watch is a business news brand of 27 Frames Communications LLP. It places the spotlight on PSUs, Governance, Bureaucracy, Defence and Public Policy as the sector traverses through a period of radical change.