To check wilful defaulters and fraudsters from fleeing the country, the government has now authorised CEOs of public sector banks (PSBs) to make request for issuance of look-out circulars (LOCs) against suspects.
The move comes against the backdrop of defaults by Vijay Mallya, Nirav Modi and Mehul Choksi and thereafter, fleeing the country.
The Ministry of Home Affairs (MHA) recently made changes in the circular by including CEOs of PSBs in the list of officials who can make request for issuance of LOCs to the ministry.
The inclusion by MHA was done following the recommendation of an inter-ministerial panel under financial services secretary Rajiv Kumar that made a case for empowering the heads of PSBs to request for the opening of LOCs.
When asked about the changes made in the circular of MHA, Kumar said it was a continuation of the government's clean-up drive of the banking sector.
Soon after the emergence of the PNB fraud and perpetrator Nirav and his uncle Choksi fleeing the country, 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 a 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 Department of Financial Services has also issued advisory to heads of all PSBs to take note of the changes in the circular and act as and when required in the specified manner.
Pursuant to the amendment of the MHA circular last month, the list now includes the chairman or managing director and CEO of all PSBs, the circular said.
Thus, the heads of PSBs have now been empowered to issue requests of opening of LOCs for wilful defaulters as per the above-mentioned guidelines of MHA against whom an FIR is yet to be filed, it said.
Earlier this year, the government formed an inter-ministerial panel to look into various issues, including how to put a check on wilful defaulters fleeing the country.
Mallya had fled the country in March 2016 after defaulting on loans given to Kingfisher Airlines, which was promoted by his group.
Moreover, Parliament passed the Fugitive Economic Offenders Bill, 2018, giving authorities powers to attach and confiscate the proceeds of crime and properties of economic offenders, like bank fraudsters or loan defaulters fleeing the country.
The law is aimed at quickly recovering losses to exchequer or PSBs in cases of frauds.
Union Finance Minister Arun Jaitley had in his Budget speech for 2018-19 said the government was considering bringing a new law to confiscate assets of such absconders.