DIMAPUR, NOVEMBER 14 (MExN): The Business Association of Nagas (BAN) on November 14 reiterated it stand for the implementation of SARFAESI Act, 2002 in Nagaland. It stated, in press release, that the State Government take immediate action on the issue.
The question of the implementation of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest, (SARFAESI) Act, 2002, has generated huge debate in the State in the recent past.
For the BAN, the debate represented a “healthy democratic process that would provide enough inputs for the policy framers to consider before finalising.”
While stating that its ultimate aim is to contribute actively to transforming Nagaland into a vibrant economy, the BAN expressed hope that the policy makers would keep in mind the urgency of building a robust economy by providing avenues for the younger generation to engage in activities within their native place.
“The Government is responsible to bring about the right policy for the State if we wish to remain significant for the stakeholders in particular and the country in general… It is time we break free of the shackles of begging with New Delhi for running of the affairs of the state.”
It said that the job market in Nagaland is “fully saturated” with both the government and private sector unable to provide employment. With special emphasis on the private sector, it held that “locals” are unable to start their own business, while attributing a near “absence of an entrepreneurial ecosystem” as the single reason for such an economic condition.
Accordingly, it argued that one of the primary factors of the entrepreneurial ecosystem is access to capital via banks, which offers a “level playing field amongst all the operators in the business scene.”
“If a businessperson across the border has access to bank finance, we too, should have the same opportunity,” it noted.
As a financial intermediary- the banks, would try to funnel financial capital to healthy businesses that have good prospects of repayment, it said. The greater the risk of not repaying, the lesser any financial institution will pay to acquire the loan and this calls for the need for regulation, BAN added.
In this context, BAN argued that while banks can fail, their failures, unlike other firms, have broader ramifications— hurting customers, other banks, community, and the market as a whole.
“The purpose of pledging movable or immovable security with the bank is to assure of repayment and maintain accountability. This in no way means disposing the property,” BAN noted.
It further contended that big project loan entailing huge employment is not possible without collateral security.
BAN, therefore, stated that policies that directly or indirectly impact the business environment have to change as the manner of operation has changed over the decades.
“A businessperson’s intention is to create more wealth and not to squander them.”
The Association further highlighted how under the present system, banks are unnecessarily being entangled in the long legal proceedings to auction mortgaged property, where sometimes the “financial implications on legal fees” far exceeds the interest component of the defaulting borrowers.
This has been a predicament for the functioning of the banks which ultimately affects the economy and the SARFAESI Act was introduced to avoid such situation, BAN said.
Devoid of such measures, it opined that banks are reluctant to take landed property as security and insist on other collateral securities from prospective borrowers, which many a time could not be arranged, and business ventures fail.
The Association further clarified that the introduction of the Act does not imply that banks would extend loans just to take mortgaged property and sell it to outsiders.
It also noted that even without SARFAESI, banks are selectively extending loan with collateral in Nagaland, but very few suits have been filed for possession of the mortgaged property.
Under the Act, bank will issue 60 days’ notice after the accounts turn NPA (Non Performing Assets) to the defaulting borrower to repay the loan.
“If the loans are not repaid, banks takes only symbolic possession, while ownership and occupation remains with the concern borrower,” it said.
Even if bank initiates the process of auctioning the property, it will naturally follow the laws of the land and only the eligible purchaser of the land could participate in the auctioning, it added.
“Therefore, the question of exploitation from the outside does not arise,” BAN affirmed.
The Association also highlighted how Singapore, which till early 1960s was reeling under poverty, became one of the leading economic powers through effective government policy, business friendly environment, social stability and stringent rules.
To this end, it noted that economic progress will not happen in the State unless the government implements investors’ friendly measure, where banks and financial institutions could extend financial assistance to the needy entrepreneurs.
