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Dimapur, Oct. 1 (EMN): The Finance department, government of Nagaland, on Friday stated that non implementation of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act) 2002 has been detrimental to the overall economic growth of the state as it restricts flow of credit to the people.
The department stated this in a clarification note issued a day after the Nagaland Bar Association (NBA) claimed that the Act would infringe on the constitutional rights conferred by Article 371A and “would be highly disastrous to the members of the business community and entrepreneurs”.
The department said that the Act has not been implemented in Nagaland because of the land holding system in the state and restrictions on transfer of land to persons other than indigenous inhabitants of the state, while citing the provisions given in Article 371A (1)(a)(iv) of the Constitution of India and Nagaland Land and Revenue Regulations (Amendment) Act, 1978.
“To facilitate mortgage-based loans, the Nagaland Land and Revenue Regulations (Amendment) Act, 2002 permitted transfer by way of mortgage in favour of banks, registered co-operative societies and financing institutions with the condition that such entities shall not transfer any land to a person other than the indigenous inhabitants of Nagaland except with the previous sanction of the state government or an authority appointed in this behalf,” stated the Finance department.
It stressed on the need to implement Sarfaesi Act, saying that people from the state weren’t able to avail loans from financial institutions due lack of secured assets.
“The Credit Deposit Ratio of Nagaland as in quarter ended June 2021 was only 48.44% against national benchmark of 60%. Banks 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 and has been requesting for implementation of the Sarfaesi Act, 2002 in the state to enable them to extend loan against secured assets,” it stated.
It also clarified that under the Act, 2002, banks and financial institutions can initiate steps to take possession of secured assets only if the borrower fails to repay loan continuously for three months, and 60 more days are given to discharge the liabilities in the event of a debt being classified as non-performing asset. It said the secured assets can be redeemed by paying the dues before the date of sale or transfer even after the lapse of 60 days.
“To facilitate flow of mortgage-based loans to the indigenous inhabitants of the state 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 harmony with the provisions of Article 371A (1) (a) (iv) of the Constitution of India and the Nagaland Land and Revenue Regulations (Amendment) Act, 2002 is being explored by a Select Committee of Nagaland Legislative Assembly, under which ownership of security interest will be allowed to be transferred following the procedure laid down in the Sarfaesi Act, 2002 only in favour of indigenous inhabitants of Nagaland and none else,” the update added.