The Union government has empowered chief executives of public sector banks (PSBs) to request a look-out circular (LoC) against wilful defaulters of loans in an effort to prevent them from fleeing the country, senior finance ministry officials said on Thursday. This is a significant step, given it will enable PSBs to alert authorities to stop wilful defaulters from escaping even before an FIR is registered against them by enforcement agencies.
Big businessmen have fled the country in recent times, to avoid prosecution, thus leaving the government red-faced. Government officials said investigative agencies often took time to register an FIR, following a complaint against wilful defaulters from banks. “We don’t want to leave any window for defaulters to leave the country,” said a finance ministry official. 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”.
Earlier, MHA guidelines empowered 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, to place a request for issuance of LOC.
The MHA would then issue the LOC to all immigration check points 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”.
The decision follows recommendations by a committee headed by Financial Services Secretary Rajiv Kumar in a meeting held earlier this year. The committee was formed to suggest steps to prevent wilful loan defaulters from fleeing. The panel had recommended 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”.
The Minister of State for External Affairs, V K Singh, had informed Lok Sabha earlier this year that 28 people involved in financial irregularities and facing criminal investigation had either fled the country or were living abroad.
The minister cited data that the CBI and ED had shared. The Centre has been making attempts to bring them back by issuing LOCs or making extradition requests to the country where they allegedly fled.
The government has been attempting to bring back diamond traders Nirav Modi and Mehul Choksi for their involvement in the Rs 143-billion Punjab National Bank fraud, which surfaced in February. While Choksi has been traced in Antigua, Nirav is believed to be in the UK.
Apart from Nirav and Choksi, several industrialists including Vijay Mallya, founder of the now-defunct Kingfisher Airlines, have fled the country before being declared wilful defaulters.
The ED had moved court recently for declaring Sterling group promoters Nitin Sandesara, Chetan Sandesara, Dipti Sandesara and Hitesh Patel as fugitives in a money-laundering case, involving a bank fraud of Rs 81 billion.
While the Sandesara family is believed to be in Nigeria, Patel has been traced in the US. As a precautionary measure, the Ministry of Finance had earlier this year directed state-owned banks to obtain passport details of borrowers who have availed of more than Rs 500 million in loans.
Congress President Rahul Gandhi has accused the government of “helping” Mallya, Nirav and Choksi escape the country. The Centre has countered the criticism by saying these loans were provided during the previous government’s tenure, without following due diligence.