The central government is considering barring some wilful loan defaulters from leaving the country, sources in the government said.
A list of people who have defaulted on the bank loans and are wilful defaulters has been prepared by the banks. Bloomberg has put the number of such defaulters at 91, but it could not be independently verified.
The finance ministry had recently directed state-owned banks to obtain passport details of all borrowers, who have taken loans above Rs 50 crore, within 45 days in order to prevent repeat of instances of defaulters – including billionaire jewellery designer Nirav Modi and liquor baron Vijay Mallya – fleeing the country. It had also asked the banks to modify the loan application form to incorporate passport details of borrowers.
Around 400 companies have been classified as wilful defaulters. "This is an extraordinary step which has never been taken in the past," D K Mittal, a former banking secretary, said, "This will at least worry defaulters and deter them from usurping public money."
To stop defaulters from leaving the country, the finance ministry, on the information received from banks, will have to write to the Ministries of External Affairs (MEA) and Home. "The MEA will impound their passports, while the Home ministry will inform all the immigration points about such persons," said Mittal, adding, "though they can still leave illegally through Nepal and Bhutan."
A 'wilful defaulter' is a person or an entity who has not paid back the loan, despite the ability to do so, or has diverted money for some other purpose. According to RBI regulations, for the defaulter to be categorised as 'wilful', s/he/they must be intentional, deliberate and calculated.
"In absence of a court order, the government can issue an executive order in the public interest to prevent the wilful defaulters from leaving the country," says Ramakant Rai, partner at law firm Trilegal, adding, "Such action is necessary because once a person has left the country, the banks will not be able to recover the public money."
The government is under pressure to act against the loan defaulters after Rs 13,000 crore fraud came to light at the Punjab National Bank. In the past, there have been several high-profile cases where the defaulters left the country and the government has been finding it tough to extradite them.
As many as 31 Indians have fled abroad to avoid prosecution, the government told Parliament on Wednesday.
The government plans to soon introduce a Fugitive Economic Offenders Bill to deter fugitive economic offenders from evading the legal process. The Bill seeks to give powers to confiscate assets of the fraudsters. The banks are currently facing Rs 8 lakh crore worth of Non-Performing Assets (NPAs).
Will To A Way
A ‘wilful defaulter’ is a person or entity who has not paid back the loan, despite the ability to do so, or has diverted money for some other purpose. Around 400 companies have been classified as wilful defaulters.
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