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Post-PNB: Checking All the Boxes to Catch Defaulters


In the aftermath of the Nirav Modi-Punjab National Bank (PNB) scam episode, the government has embarked on a speedy and pro-active course of action against financial defaulters. Such urgency has not been witnessed from past governments and the facts below will show why.

This too is a UPA-era scam like many others, but with Congress president Rahul Gandhi continuing to make erroneous and frivolous claims, such as linking Nirav Modi to the Prime Minister because of their shared surname, it will be useful to see how the government has been making its intent and stand clear by going all out.

Below are some of the measures the government has taken post the revelation of the PNB scam.

The No-Fly List

According to news reports published by Bloomberg and reprinted by Financial Express on March 21, 2018, the government has compiled a list of 91 people it is considering barring from leaving India because of their possible involvement in defaults. Here is a look at an excerpt of the news report:

Evidently, the government is coming down hard on loan defaulters who may try to flee the country in the near future.

Policy Interventions

In the wake of the alleged PNB fraud, the administration has approved the Fugitive Economic Offenders (FEO) Bill, 2018. The bill was in the pipeline and was drafted as far back as May last year and the draft was made available by the government for public comment.

All cases wherein the total value involved in such offences is Rs 100 crore or more will come under the purview of this bill. It involves confiscation of the property of an individual, declared as a fugitive economic offender, resulting from the proceeds of crime. Further, confiscation of other property belonging to such an offender in India and abroad, including benami property, will also be possible by means of the FEO Bill.

The proposal for the establishment of the National Financial Reporting Authority (NFRA) has also been approved. The NFRA will act as an independent regulator for the auditing profession, enforcing auditing standards and ensuring the quality of audits to strengthen the independence of audit firms and quality of audits.

For details on the FEO Bill, please read our earlier articles Was the Fugitive Economic Offenders Bill Necessary? and Does the Fugitive Economic Offenders Bill Look for Magical Solutions or Real Ones?

Unanswered Questions

While the present government appears to be working hard to make policy-level interventions as well as immediate changes to ensure that financial defaulters do not get away in future, there are several questions that leaders from the previous administration may need to answer.

While Mr Gandhi is usually quick to point out that Nirav Modi and the Prime Minister share a surname — and he feels that is ground enough for linking the two with the PNB scam — he remains silent on his own party’s solutions for nabbing future defaulters. Perhaps if Mr Gandhi was not so busy making vague claims, he could have actually answered a few questions about the scam, which, after all, had begun during the tenure of his party’s government?

Also, the alleged PNB scam was not the first instance of defaulters being outside the country or even fleeing it. But, unlike the previous two terms of the Central government – both Mr Gandhi’s party’s – the current administration has evidently been taking rapid and strict action. What did the last government do to make it difficult for defaulters to leave the country?