What’s in the news?

• The Bombay High Court held that public sector banks cannot recommend or request the issuance of Look Out Circulars against loan defaulters and has set aside the provisions of the central government’s Office Memoranda that empowered PSBs to do so. The court held that the fundamental right to travel abroad cannot be curtailed by executive action without any government statute or controlling statutory provision.

What is a Look Out Circular(LOC)?

• An LOC is a coercive measure adopted by a State to restrict and regulate the physical movement of a person.
• An LOC is issued to make sure that an individual who is absconding or wanted by law enforcement agencies is not able to leave the country. 
• It is mostly used at immigration checkpoints at international airports and seaports by the immigration branch. 

LOC in India

• The LOCs under challenge were issued by the Bureau of Immigration of the Ministry of Home Affairs (MHA), and allowed the authorities at any port of departure to prevent a debtor to a PSB from leaving India. The LOCs were based on OMs issued by the Ministry from October 27, 2010 onward.
• In September 2018, a ground was introduced to issue an LOC to restrain a person from going abroad if their departure was detrimental to the “economic interest” of the country. 
• The following month, a new clause was introduced empowering the chairperson of the State Bank of India (SBI) and the managing director and chief executive officers of all other PSBs to request immigration authorities to issue LOCs against default borrowers.

Default Borrowers

• The default borrowers include not only the borrowers but also the guarantors for repayment of loans, and the principal officers or directors of corporate entities in debt.