Banking News

Common rules for lookout circular on defaulters in works


The government has initiated discussions with state-owned banks to thrash out a common objective framework to make a request for the issuance of a lookout circular (LOC) against defaulters, said people familiar with the matter.

At present there is no uniformity in guidelines for banks and each lender takes decisions based on its own internal policies.

The new guidelines will seek to ensure that a uniform criterion is followed by all public sector banks and a threshold loan amount may be set to make such requests, said the people.

The move comes after courts said in some cases that the issuance of LOCs is a coercive measure and should be used sparingly.

“We have taken into account the observations made by courts in certain cases. These are preliminary discussions to work out a common framework for public sector banks to eliminate any scope of arbitrariness,” said one of the officials, who did not wish to be identified.

A lookout circular helps banks restrain defaulters from leaving the country and has been used in the many high-profile cases. For example, former Jet Airways chairman Naresh Goyal was stopped at the airport on the basis of LOCs requested by the banks.A bank executive said any such framework will also need approval from the Reserve Bank of India to ensure there are no breaches of regulatory norms. “That discussion is also on,” he said.In 2018, the government included the chairman, chief executive officers and managing directors of public sector banks in the list of individuals who could seek the issuance of LOC against offenders to prevent their escape from the country.

The same year, the government advised public sector banks to obtain certified copies of the passports of the promoters, directors and other authorised signatories of companies availing of loan facilities of ₹50 crore and above.


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