India after witnessing many high-profile loan defaulters who fled, the government has granted banks an authorisation to keep a check on wilful defaulters by requesting the issuance of look-out circulars (LOCs) against suspects to clean-up the bank balance sheet.
The decision has come in the wake of loan-default cases of Vijay Mallya, Nirav Modi and Mehul Choksi. CEOs of public sector banks (PSBs) can now make the request for issuance of LOCs to Ministry of Home Affairs (MHA). It was recommended by an inter-ministerial panel headed by Finance Secretary Rajiv Kumar. Mr Kumar claimed that this step will act as a big deterrent for wilful defaulters.
After the Punjab National Bank(PNB) scam gained limelight, the government asked banks to start collecting passport details of borrowers taking loans more than Rs 50 crore. Kumar, however, said that just getting the passport details was insufficient to thwart defaulters and fraudsters. That’s why PSB heads were given the authorisation to request for issuance of LOC by the concerned authority.
MHA circular reads,“Pursuant to the amendment of the MHA circular last month, the list now includes the chairman or managing director and CEO of all PSBs.”
Enforcement Directorate is asking for “fugitive” tags for Vijay Mallya and Nirav Modi and has started attaching their properties both in India and abroad.