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Government Initiates Talks with State-Owned Banks to Standardize Procedures for Issuing Lookout Circulars

January 09, 2024

Government Initiates Talks with State-Owned Banks to Standardize Procedures for Issuing Lookout Circulars

In a recent development, the government has commenced discussions with state-owned banks to establish a unified framework for requesting lookout circulars (LOC) against loan defaulters. Currently, each bank follows its internal policies, leading to a lack of consistency in guidelines.

The proposed guidelines aim to bring about uniformity among all public sector banks, introducing a common criterion for issuing LOCs. Sources suggest that a threshold loan amount might be set to trigger such requests, ensuring a standardized approach.

This initiative follows court observations that LOCs should be employed judiciously as a coercive measure. Officials, preferring anonymity, stated that the discussions are preliminary, intending to eradicate any arbitrariness in the process.

Lookout circulars serve to prevent defaulters from leaving the country and have been instrumental in numerous high-profile cases. For instance, former Jet Airways chairman Naresh Goyal was detained at the airport based on LOCs requested by banks.

Bank executives acknowledge that any framework established would require approval from the Reserve Bank of India to adhere to regulatory norms. Discussions on this matter are currently underway.

In 2018, the government expanded the list of individuals eligible to request LOCs to include the chairman, chief executive officers, and managing directors of public sector banks. Additionally, public sector banks were advised to obtain certified copies of passports for promoters, directors, and authorized signatories of companies availing loans exceeding ₹50 crore.

Tags:
banking news

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