Feasibility of implementing SARFAESI Act explored by NLA panel
Responding to arguments put forth by the Nagaland Bar Association (NBA) to the state government against succumbing to pressure from various sources for implementing the SARFAESI Act 2002 for the sake of availing loans and boosting economic activities in Nagaland, the Finance Department (FD) has clarified that non-implementation of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act 2002 has been detrimental to the overall economic growth of Nagaland by restricting flow of credit to people.
It pointed out that Credit Deposit Ratio(CDR) in Nagaland for the quarter ended June 2021 stood at only 48.44% as against the national average of 60% .
FD pointed out that banks in Nagaland have been reluctant to extend loans in the absence of secured assets and an effective mechanism for expeditious recovery of dues in case of default in loan repayment.
It said banks have been requesting for implementation of the SARFAESI Act, 2002 in the State to enable them to extend loan against secured assets.
Once the SARFAESI Act, 2002 is implemented, FD said banks and financial institutions can initiate steps to take possession of secured assets only if the borrower defaults in repayment of loan and the account in respect of the debt is classified by the secured creditor as Non-Performing Asset(NPA) i.e; failing to repay continuously for three months. Once the debt has been classified as NPA the borrower is given time of sixty days to discharge the liabilities. If the borrower fails to discharge the liabilities within sixty days, the secured assets can be redeemed by paying the dues to the secured creditor any time before the date fixed for sale or transfer of the secured assets.
The Finance department mentioned that Article 371A (1)(a)(iv) of the Constitution of India provides that no Act of Parliament in respect of ownership and transfer of land and its resources shall apply to Nagaland unless its Legislative Assembly by a resolution so decides.
Also, Nagaland Land and Revenue Regulations (Amendment) Act, 1978 further provides that no person other than indigenous inhabitants of Nagaland shall acquire or possess any land in the State by transfer, exchange, lease agreement or settlement.
Therefore, the department said that in order to facilitate flow of mortgage-based loans to indigenous inhabitants of Nagaland within the existing land holding system and provide much-needed impetus to economic growth of the State, the feasibility of implementing the SARFAESI Act, 2002 in sync with provisions of Article 371A (1) (a) (iv) of the Constitution of India and the Nagaland Land and Revenue Regulations (Amendment) Act, 2002 was being explored by a Select Committee of Nagaland Legislative Assembly.
Under this, it said that ownership of security interest would be allowed to be transferred following the procedure laid down in the SARFAESI Act, 2002 only in favour of indigenous inhabitants of Nagaland and no one else.