Government authorises banks to issue lookout for defaulters
As per a Ministry of Home Affairs circular, the CEOs of public sector banks are now authorised to make a request for issuance of lookout circulars...
New Delhi: As per a Ministry of Home Affairs circular, the CEOs of public sector banks are now authorised to make a request for issuance of look-out circulars against suspects. The circular has come on the heels of the wake-up call in the banking sector against the backdrop of defaulters like Vijay Mallya, Nirav Modi and Mehul Choksi fleeing the country. The MHA gave the authorisation empowering the CEOs following a recommendation of an inter- ministerial panel under Financial Services Secretary Rajiv Kumar. When asked about the changes made in the circular, Kumar said it was a continuation of the government’s clean-up drive of the banking sector.
Soon after the PNB fraud hit headlines, the Finance Ministry asked PSBs to collect passport details of all those borrowers, who have borrowed loans of more than Rs 50 crore. However, possession of mere passport detail was not enough but this circular has empowered banks to take decisive action against wilful defaulters and fraudsters by requesting for issuance of LOC by the concerned authority, thereby thwarting any move by them to flee the country, Kumar said.
“It will act as a big deterrent for wilful defaulters and also bring about fundamental change in the creditor-debtor relationship,” he said.The requests for look-out-circulars can also be made against wilful defaulters against whom an FIR is yet to be filed, it said.Mallya had fled the country in March 2016 after defaulting on loans given to Kingfisher Airlines, which was promoted by his group.