Niravgate fallout: Government seeks to restrict travel of defaulting companies' promoters

In a further crackdown on promoters of defaulting companies, the government plans to restrict their foreign travel and scrutinise abnormal increase in overseas transactions, said two people aware of the development.

The enforcement wing of the Reserve Bank of India and the Financial Intelligence Unit (FIU) will be roped in to implement these measures.
“It was observed in several cases that overseas transactions through foreign subsidiaries and other companies increased tremendously at least six months prior to the promoter fleeing the country. FIU and RBI could monitor such transactions and raise red flags which could give some time for the government agencies to react,” one person said.


The finance ministry and RBI did not respond to queries seeking comment on these steps.

RBI, as the authority on capital flows in the country, is privy to information on the outward remittances of both individuals and Indian companies. The banking regulator’s enforcement team will be responsible for flagging unusual transactions and alert the authorities, the people said. Investigative agencies including the FIU may be roped in to look out for changes in the business patterns of defaulting companies.

Nirav Modi, said to be behind the ₹11,300 crore Punjab National Bank financial fraud, is presently believed to be in the US. “Since it is suspected that many promoters with the help of bankers have managed to withdraw money and then ship it outside India through hawala or informal channels, it is important to nip it in the bud,” said another person aware of the matter.

“Large overseas remittances made by promoters of companies with stressed loans either directly through family trusts or group company will be monitored. We may look at impounding passports if such suspicious transactions come to light.”