Financing Entrepreneurship - Eastern Mirror
Monday, February 06, 2023

Financing Entrepreneurship

By The Editorial Team Updated: Oct 07, 2021 11:32 pm

The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (Sarfaesi Act) has been a hot topic of discussion for a while now in Nagaland. The economic distress caused by the Covid-19 pandemic and the growing unemployment problem in the state has breathed new life into this contentious matter. The crux of the matter is that it is almost impossible for the unemployed in the state to avail mortgaged loans to start enterprises or business of their own. Banks are reluctant to extend loans to the people of the state in the absence of secured assets and this issue will continue till an effective mechanism for recovery of loans is in place. Financial institutions may have had faced bitter experiences of non-performing assets in the state; which could have forced it to take extra precautions in sanctioning loans. In one way, everybody is suffering today because of some bad loans in the past. But even if not for this reason, banks will eventually have issues with the Naga land holding system as it obstructs recovery of dues in case of default in loan repayment. With no other means to finance their dream ventures, the business community and prospective entrepreneurs have been pressing the state government to implement the Sarfaesi Act. On the other hand, some are apprehensive about the possibility of the Act infringing on the constitutional rights conferred by Article 371A of the Indian constitution, which has provision for ownership and transfer of land in the state. They expressed fear that the provision in the Act, which allows legal agents to sell off mortgaged assets of defaulters after a certain period of time without the court’s intervention, could eventually backfire on those who avail loans.

Well, the fear is reasonable. However, this fear arises only if the state authorities fail to clearly lay out provisions about land transactions in the event of enacting the law. Moreover, under the Sarfaesi Act, borrowers are given 60 days to clear the liabilities even if their debts are classified as non-performing assets due to failure of repayment for 90 days. With the Finance department of the state having clarified that the select committee of the NLA is exploring the feasibility of implementing the contentious Act and that the transfer of legal rights of mortgaged assets would be done only in favour of indigenous inhabitants of Nagaland, attempts to derail the Act even before laying a hand on the final draft would serve nobody. Unnecessary pressure to hasten its implementation too should be avoided given the complex and sensitive nature of Naga land holding system and restrictions on transfer of land. Government authorities should be given enough time to study the feasibility and ensure that there are no hiccups when it is implemented. Push and pull from various quarters for serving individual interests will only delay the execution of the Act and deny the much-needed assistance to prospective entrepreneurs. Talking about boosting entrepreneurship in the state is meaningless in the absence of financial resources.

By The Editorial Team Updated: Oct 07, 2021 11:32:30 pm