DIMAPUR, OCTOBER 1 (MExN): The State Finance Department today issued a clarification to a recent statement made by the Nagaland Bar Association (NBA) that implementation of the SARFAESI Act would be “disastrous.”
The Act empowers banks and financial institutions to take possession of the secured assets against default in repayment of loan and realise their money by selling the secured assets by following the procedure laid down in the Act, without the intervention of Courts.
The department stated that the Act has not been implemented in Nagaland in view of the land holding system in the State and restrictions on transfer of land to persons other than indigenous inhabitants of the State.
It said that in order 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.
The department noted that non implementation of the SARFAESI Act has been detrimental to the overall economic growth of the State as it has restricted flow of credit to the people. It informed that the Credit Deposit Ratio of Nagaland as only 48.44% against national benchmark of 60% for the quarter ending June, 2021.
“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 added.
Under the SARFAESI Act, 2002 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 i.e; failing to repay continuously for three months. The department informed that in the event of a debt being classified as non-performing asset, the borrower is given time of sixty days to discharge the liabilities. In case 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.
It informed that the feasibility of implementing the SARFAESI Act, 2002 in harmony with the provisions of Article 371A and the Nagaland Land and Revenue Regulations (Amendment) Act, 2002 is being explored by a Select Committee of Nagaland Legislative Assembly.
This, it claimed, would 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. Under this, 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, it added.
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