Public Sector Banks have had wilful defaulters who have on some cases, even fled the country. To stop this drudgery and aid PSU to extract the money loaned, the government has empowered the Banks to seek out Lookout Circulars (LOCs) against wilful defaulters. Many cases have been recorded against such economic offenders where the person tactfully evades repaying the loan by various measures. With the LOCs, the government hopes that the grievances of the Public Sector Banks will come to an end.
In recent years, high-profile cases involving personalities like Vijay Mallya and Nirav Modi have been registered where they wilfully evaded paying back the hefty amount of money, they loaned from public sector banks. With the amount of money in question, one such defaulters derail the whole economy of a bank. The same power of seeking a LOC has also been handed to SIFO (Serious Fraud Investigation Office) to aid the PSUs to attain justice in case of any fraud.
Two circulars had been passed by the ministry conveying the above-mentioned change. What required cognizable offence under the IPC to be sanctioned, the LOC will be available only if deemed necessary and requested by any PSU or SIFO. Under law, any LOC will be valid for a period of one year unless mentioned.
This step by the government is in direct support of the public sector banks that have been looted by vindictive defaulters for some time now.