Centre starts work to restore power of PSBs to issue look-out circulars
PSBs) to issue look-out circulars (LOCs) against defaulters.
Lenders have submitted their arguments and are hopeful of a swift resolution. All options, including bringing the banking sector regulator, the RBI, on board, are being examined, said executives aware of the developments.
«The government is taking inputs from all stakeholders before making a case for the restoration of the banks' power to issue LOCs,» said a bank executive, adding that the public sector banks (PSBs) might also move the Supreme Court through the Indian Banks' Association seeking reinstatement of this power.
Last month, the RBI issued Master Direction on the Treatment of Wilful Defaulters and Large Defaulters under which banks and NBFCs will have to examine the 'wilful default' aspect in all non-performing asset accounts with outstanding amounts of ₹25 lakh and above.
«The instrument (LOCs) is sparingly used and acts as a deterrent, which has the potential to bring about behavioural change among borrowers. We have represented through the IBA for the restoration of these powers,» said another executive, adding that the government is also exploring amendments to the Banking Regulations Act, if required. In April, the Bombay High Court had ruled that PSBs do not have the power to recommend or request the central government for issuance of LOCs against default borrowers. The court said that while office memorandums (OMs) of the central government were not ultra vires, the subsequent empowerment of bank managers of public sector banks to
