NiMo, Mallya effect! Government wants to catch loan defaulters before they fly out of the country

Following the incidents of high-profile loan defaulters escaping out of the country under its watch, the government, it seems, is finally taking note. It has reportedly set up a committee to come up with rules aimed at stopping defaulting promoters from fleeing the country. The move comes after liquor baron Vijay Mallya, PNB scam accused diamantaire Nirav Modi and Mehul Choksi gave a slip to the airport authorities.

Jatin Mehta, another fugitive diamond trader of Winsome Diamonds and Jewellery Ltd became a national of St Kitts and Nevis after renouncing his Indian citizenship soon after his firm started defaulting on loans taken from banks. Mehta owes close to Rs 7,000 crore to various banks in the country.

According to a report in The Economic Times, the committee headed by financial services secretary Rajiv Kumar has representation from the Reserve Bank of India (RBI), the ministries of home and external affairs, the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI). The new measures will also include a check on possible dual citizenship.

The committee will suggest mechanisms and whether changes are required in existing laws. "We will focus on those promoters who have citizenship of any other country and have not declared the same," the finance ministry official told the daily.

The report added that the government may also seek details of any overseas travel planned by promoters of companies which have defaulted on loan payments. It takes some time before a loan default is classified as NPA and years to uncover a fraud. Taking advantage of this, promoters of such companies flee from the country in advance.

"We may not necessarily stop them but in cases where there are adverse reports from intelligence agencies or even banks, the government may choose to ask for details of their travel and other such required information," the report quoted an official from the ministry.

Such promoters will only be barred from traveling or have their passports suspended if there is specific information that they could become fugitives from justice, it added.

The Centre had earlier asked all public-sector banks to get a certified copy of the passport and other details of borrowers applying for loans of Rs 50 crore or more. The borrowers may include promoters, directors or other authorised signatories of companies.

In a written reply in the Rajya Sabha, Shiv Pratap Shukla, Minister of State for Finance, said: "With a view to enable banks to inform relevant authorities of passport details, the government has asked the public sector banks to obtain a certified copy of the passport of the promoters/directors of companies availing of loan facilities of Rs 50 crore and above."

The minister said for existing cases of default, the banks have been advised to get all relevant details, including copies of the passport. In cases where the individual or company representative do not have a passport, a declaration stating the non-availability of the document should suffice.