The Securitisation and Reconstruction of Financial Assests and Enforcement of Security Interest (SARFAESI) Act, 2002 was an Act of the Indian Parliament whereby banks and other financial institutions in India are allowed to auction residential or commercial properties of defaulters to recover loans. This act is an effective instrument for banks to recover defaulting loans and is definitely required in a growing economy like ours to create ample credit opportunities for upcoming entrepreneurs and young businessmen or industrialists of Nagaland. This act also ensures that the state develops in due earnestness with the growth of infrastructure including industries through financial institutions like banks. It is needless to say that without sound capital investments and loans through banks and financial institutions, no country or state can ever develop.
Though banks in Nagaland have been implementing the SARFAESI Act since 2002, due to a letter from the Law & Justice Department to the Finance Department caused the banks and other financial institutions to cease all kinds of financial operations whereby the public was given loan in lieu of land mortgages. The main reason behind this was the argument of the Law & Justice Department that the SARFAESI Act was in contravention of the Article 371A of the Indian Constitution which gives special privileges to the Nagas and also the Nagaland Land and Revenue Regulations (Amendment) Act 2002 which restricts transfer of land to a person other than the indigenous inhabitant of Nagaland.
The above turn of events have put the local inhabitants of Nagaland to a disadvantageous position whereby they are not able to take loans from the banks by mortgaging their land. This has also led to many individuals in Nagaland taking huge sums of money from unauthorized money-lenders who charge exorbitant rates of interests and when they are not able to repay on time they confiscate their property. This has left many families ruined and financially overburdened in the past few decades. Now, in the wake of such social dilemma in Nagaland, the government needs to rise to the call of the hour and think about the benefit of the general public especially the upcoming generation of young entrepreneurs and industrialists who have no options left but to depend on the financial facilities provided by the banks. Presently, the hands of the banks are literally tied and they are not able to sanction any loans by mortgaging lands belonging to indigenous inhabitants of Nagaland. However, the fact remains that the banks have nothing to lose even if they do not invest or give out loans to people of a particular state as they can utilize the accrued capital in other branches out of Nagaland. In this way we are not only increasing the wealth accumulation of the banks but also promoting their business in Nagaland through our deposits without acquiring any major bank benefits from them. Even though the Banks in Nagaland prefer to give easier loans like car loans, loans against Fixed Deposits and to government employees alone where recovery is guaranteed through salaried accounts, what is the benefit of the common people in Nagaland if they are unable to mortgage even their own landed properties for taking loans from the banks? The ultimate benefit of all financial institutions like banks should go to the common people in general instead of some few individuals.
In light of the above, it becomes a prerogative of the Nagaland State Government to urgently discuss in the floor of the Assembly the implications of not continuing with the SARFAESI Act in Nagaland and to deliberate upon additional options so that the disadvantaged sections of the people are benefitted while at the same time not infringing upon the already existing Article 371A and the Nagaland Land Revenue Regulations (Amendment) Act 2002. One alternative which the government can mull upon is a request to the Central Government for amendments in the SARFAESI Act in context to the special provisions given to the people of Nagaland through Article 371A. The amendments can be made in such a way that in case an inhabitant of Nagaland is unable to repay his/her loan due to one or the other reasons, his/her land property kept as mortgage with the banking institution concerned may put up the same land in auction but such auction should be limited to only local indigenous inhabitants of Nagaland and not to any outsider so that the provisions of transfer of landed property as enshrined in the NLRRA 2002 remains unaffected. This will ensure that not only the banks are able to mortgage land in lieu of loans but in the wake of a default they can also liquidate the same by auctioning off the land to local inhabitants only, thereby following both the SARFAESI Act and the Article 371A in letter and spirit.
But ultimately all these can happen only when there is a strong and unbiased political will on the part of the State Government to bring about a much needed reformation for the benefit of the people. The State Government should be ready at all times to table such important discussions on the floor of the house. Recently, there was a news item published in Nagaland Page about the unilateral decision taken by the Speaker of NLA to withdraw the SARFAESI Act from the lists of business in the State Assembly. Whereas, the issue should have been taken in a matured manner and decision related to the same should also have been taken up after consultations with experts and discussions with the stakeholders including all the parties and financial institutions, as the matter in question cannot be undermined for the development of the State and its people. Does this obstinacy on the part of some individuals mean that they are utilizing the loopholes in the SARFAESI Act for their own personal gains? Are they trying to discourage the people of Nagaland not to avail loans by mortgaging lands and thereby indirectly encouraging the illegal and unauthorized money lenders to thrive and monopolize?
There are numerous educated unemployed youths in Nagaland who are trying to venture into self employment opportunities by taking loans from the banks. The government should encourage the youths especially the upcoming entrepreneurs, business start-ups, industrialists, etc. by bringing in better financial opportunities through banks whereby the banks also can gain in return. We, as laymen may not be able to bring about legislations and major changes in state policies but those who are at the helm of affairs have both the power and the position to do so. Since we are a democracy, it is legitimate that the government should use its power and position only for the general welfare of its citizens. It should shed all personal vendettas and afflictions when it comes to development of the state as a whole. If the SARFAESI Act does not hinder the growth and development of the inhabitants of Nagaland, the government and the intellectuals of the state should not shy away from the issue but they should be matured enough to discuss the same at all levels.
While it remains for the general public to judge who has gone wrong and where, it is my humble suggestion that all the stakeholders including the financial institutions like banks should ponder on this issue and take a concrete step which will benefit the entire state and its population in the long run. At the same time the general public must also come up and voice their opinions and suggestions on any important issues instead of blindly accepting policies and later on making a hue and cry out of them.
Dr. Andrew Ahoto Sema
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