Since 2018, six Public Sector Banks (PSBs) have issued 1,071 Look-out Circulars (LOCs) in order to prevent wilful defaulters from absconding to other countries.Wilful defaulters are borrowers who deliberately or intentionally fail to repay their debts, even though they have the capacity to do so.
Look-Out Circular (LOC)
- It is a notice to stop any individual wanted by the police, investigating agency or even a bank from leaving or entering the country through designated land, air and sea ports.
- The Bureau of Immigration, under the Ministry of Home Affairs, is responsible for preventing such individuals from entering or leaving the country if there is a notification against them.
- There are a total of 112 immigration check posts located throughout the country.
Who Can Issue LOCs:
A large number of agencies can issue lookout circulars;
- Central Bureau of Investigation (CBI)
- Enforcement Directorate (ED)
- Directorate of Revenue Intelligence (DRI)
- Income Tax department
- State police and intelligence agencies.
The officer who issues a LOC should not be below the rank of a district magistrate or superintendent of police or a deputy secretary in the Union Government.
Modification & Validity
- LOC can be modified; deleted or withdrawn only at the request of the originator.
- LOC will remain valid for a maximum of 12 months, and if there is no new request from the agency, it will not be automatically renewed.
- The Bureau of Immigration, is responsible for maintaining and taking action against individuals with LOC at Immigration Check Posts (ICPs) as directed by the originating agency.
Power of PSBs to Issue LOCs
- Earlier, as of 2018, banks were also authorised to issue LOCs against individuals who could potentially harm the economic interests of the country.
- However, recently the Bombay High Court ruled that PSBs cannot issue LOCs against alleged loan defaulters, deeming it a violation of fundamental rights in the absence of a statute or law.
- This ruling overturns the 2018 Government Office Memorandums, which had empowered banks to issue LOCs.
Wilful Defaulters
- The Reserve Bank of India (RBI) defines wilful defaulters as borrowers who meet one or more of the following criteria:
- Deliberate non-payment of dues despite having sufficient funds.
- Diverting loan funds for purposes other than what they were borrowed for.
- Syphoning off loan funds so they are unavailable for repayment.
- Minimum Threshold: The minimum loan amount for a borrower to be labelled a wilful defaulter is Rs 25 lakh and above.
- A large defaulter refers to a borrower with an outstanding balance of Rs 1 crore or more, whose account has been categorized as doubtful or a loss.