The Loan Tap

Much has been said about the reluctance of banks to lend in Nagaland. However, the issue deserves to be examined beyond the familiar accusation that banks are simply unwilling to extend credit. The available figures present a more nuanced picture. Nagaland’s Credit-Deposit Ratio (CDR) stood at 63.64 per cent as of September 30, 2025, while total advances stood at Rs 11,723.45 crore. Credit to the MSME sector has also increased. Clearly, Nagaland is not being denied bank credit altogether. The real question is whether the State’s substantial deposit base is being converted into loans at a rate adequate to support households, entrepreneurs and businesses. A CDR of 63.64 per cent, particularly when viewed against the national level, indicates under-utilisation of local deposits. This points to a credit-delivery gap that cannot simply be explained away as weak demand. It is sometimes argued that people in Nagaland do not borrow enough from banks. That explanation, however, ignores the historical reluctance of banks to lend because of difficulties in securing land and property as collateral.That constraint was not left unaddressed. The State amended the Nagaland Land and Revenue Regulation through the Nagaland Land and Revenue Regulation (Amendment) Act, 2002, permitting indigenous citizens to mortgage land and property to banks. More recently, Nagaland adopted the SARFAESI Act, 2002, with effect from December 10, 2021, providing banks with a legal mechanism to recover non-performing assets by taking possession of mortgaged property. The legal obstacles that once made banks particularly cautious about collateral have therefore been substantially addressed. Nor is Nagaland’s NPA position so extraordinary that it can reasonably be used as a blanket justification for restricting credit. Available official figures place the State’s total NPAs at roughly Rs 550 crore to Rs 700 crore, with an overall banking NPA ratio of around 5 to 6 per cent. In the wider Northeast, the picture is hardly unique. Tripura has reported NPAs of around Rs 997.5 crore with a ratio of about 4.19 per cent; Meghalaya around Rs 900 crore to Rs 1,100 crore and 5.5 to 6.2 per cent; Manipur around Rs 650 crore to Rs 850 crore and 6.5 to 8 per cent; Mizoram around Rs 350 crore to Rs 450 crore and 3.8 to 4.5 per cent; and Arunachal Pradesh around Rs 300 crore to Rs 400 crore and 3.5 to 4.2 per cent. Nagaland, therefore, is not an outlier in the regional banking landscape. This does not mean NPAs should be ignored. Defaults under schemes such as PMEGP, NULM, MUDRA and SUI are serious and demand better appraisal, monitoring and recovery. But scheme-specific defaults cannot become a convenient reason to cast suspicion on an entire class of private employees or entrepreneurs. Responsible banking requires risk assessment, not risk avoidance. Centralised loan-sanctioning systems can compound the problem. When applications are made locally but decisions are taken outside the State, borrowers can be left facing an opaque and impersonal process. A bank has every right to reject a loan, but a genuine applicant has a right to understand the principal reasons for rejection and what can be done to correct the deficiencies. Nagaland does not need reckless or indiscriminate lending. It needs fair, transparent and context-sensitive credit. If the State genuinely wants its young people to move beyond dependence on government employment, private-sector work and entrepreneurship cannot remain a financial disadvantage. A broader economy cannot emerge if banks continue to judge borrowers primarily by where they work rather than by their demonstrated capacity to repay.