It is heartening to notice intense debate on the issue of SARFAESI Act 2002 with each stakeholders presenting their points of view. It is indeed a healthy democratic process that would provide enough inputs for the policy framers to consider before finalising. BAN (Business Association of Nagas) speaks on behalf of all the Naga businesspersons and strives to work in furthering their interest. Its ultimate aim is to contribute actively in transforming Nagaland into a vibrant economy.
A macroeconomic factor is an influential fiscal, natural, or geopolitical event that broadly affects a regional or national economy. The economic outputs, unemployment rates, and inflation defines the macroeconomic which tends to impact wide swaths of populations, rather than just a few select individuals. These indicators of economic performance are closely monitored by governments, businesses and consumers alike. And as we focus on the Macroeconomics of our state, it is important to look into what SARFAESI ACT 2002 will impact every single individual of the state directly and indirectly and those group or association who stands for and against SARFAESI ACT. The job market has become fully saturated with both the government and the private sector not being able to provide employment. In fact the private sector is very negligible in the state due to inability of the locals to start their own businesses. The single reason for such a pathetic economic condition is the near absence of an entrepreneurial ecosystem. Needless to say, young Naga talents are either wasting their time or are being forced to work as employees elsewhere in the mainland India. Given the right opportunity and environment, they would have set up their own economic activities leading to employment generation and wealth creation which could have been gainfully shared amongst the Nagas. Among other things, one of the primary factors of the entrepreneurial ecosystem is access to capital. With the ever-expanding economic transactions globally, thanks to the digital platforms, there needs to be a level playing field amongst all the operators in the business scene. For instance, if a businessperson across the border has access to Bank finance, we too should have the same opportunity. Else the cost of capital will rise exorbitantly, resulting in rise in the cost of goods or service, ultimately losing out to competitors.
Although banks do many things, their primary role is to take in funds—called deposits—from those with money, pool them, and lend them to those who need funds. Banks are a financial intermediary – an institution that operates between a depositors who lend money to the bank and a borrower who receives loan from that bank. Depositors & Borrowers can be individuals, households, financial and nonfinancial firms, or national and local governments. When banks make loans to firms, the banks will try to funnel financial capital to healthy businesses that have good prospects for repaying the loans, not to firms that are suffering losses and may be unable to repay. The perceived riskiness of the loan, given the characteristics of the borrower, such as income level and whether the local economy is performing strongly, what proportion of loans of this type will be repaid? The greater the risk that a loan will not be repaid, the less that any financial institution will pay to acquire the loan. This calls for the need for regulation. Banks can fail, just like other firms. But their failure can have broader ramifications—hurting customers, other banks, the community, and the market as a whole. Bank safety and soundness are a major public policy concern, and government policies have been designed to limit bank failures and the panic they can ignite. Regulations are therefore generally designed to limit banks’ exposures to credit, market, and liquidity risks and to overall solvency risk. Regulations also stipulate minimum levels of liquid assets for banks and prescribe stable, longer-term funding sources.
The purpose of pledging movable or immovable security with the bank is to assure of repayment and maintain accountability. This in no way mean disposing the property. Big Project loans that entails huge employment is not possible without Collateral security. A businessperson’s intention is to create more wealth and not to squander them. The manner of operating businesses have changed over the decades and therefore policies that directly or indirectly impacts the business environment also have to change.
There is always a trade-off for any good things to happen. It is incumbent upon all the stakeholders to weigh the pros and cons, conduct cost-benefit analysis, which includes social costs and social benefits. Rather than basking in the past glory, the sustenance and the perpetuity of the future generation and creating the right avenues for their dignified living is of prime importance. Under the usual course of legal proceedings of Bank loan to both poor and rich– civil suit takes lot of time and Banks are unnecessarily entangled in the legal proceedings to auction the mortgage property where sometimes the financial implications on legal fees exceeds far more than the interest component of the defaulting borrowers, which has been a predicament for the functioning of the Banks which ultimately effects the entire Macrosystem in the process. And in order to avoid this long pending case of defaulters and to recover the loan from the defaulting borrowers SARFAESI ACT 2002 was introduced.
Banks are reluctant to take landed property as security and instead insist from the prospective borrowers’ other collateral securities which many a times they are unable to arrange and their loan and business ventures fails to take place. It is not that once the State Govt has approved the implementation of SARFAESI Act in Nagaland, Banks are going to extend loan just by simply mortgaging the property and many local people will fall under dept trap or Banks are going to take their land and sell it to outsiders. Banks generally extend loan by properly appraising the economic viability and technical feasibility of the project. Banks insist Land Patta/ Jamapandi issued in the cadastral surveyed area. Except to willful defaulter, in all genuine cases, if the loan goes bad i.e become NPA, Bank initially extend measures of assistance to the borrowers like one time settlement (OTS), rescheduling of repayment schedules etc and only as the last resort Banks falls upon the mortgage property to recover their dues. There are several instances where local entrepreneur has to take loan from the market with much higher interest rate than the Banks, and if they are not able to repay the entire loan in time the loaner simply locks their mortgage property without any remedial measures. This has been happening ruthlessly in our Society. What have we done about that ?
Even without SARFAESI Banks are selectively extending loan by mortgaging landed property as a primary or collateral security in Nagaland. Though Banks had extended thousands of loans by mortgaging their land in Nagaland, very few number of suit has been filed for possession of the mortgage property. Under the SARFAESI ACT 2002, 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. After that the Bank will initiate the process of auctioning the property. At the time of auctioning, the Banks will naturally follow the laws of the land especially regarding the eligibility of the purchaser. As such, only the eligible purchaser of the land could participate in the auctioning. Therefore, the question of exploitation from the outside does not arise. Economic progress will not happen in the state unless Government implement series of investors friendly measure on economic policies, where Banks and Financial Institutions can extend financial assistance to the needy entrepreneurs.
It will help us substantiate the possibility to embrace the change by first trying to fathom the similarity of our present situation with Singapore during 1960s while Singapore was reeling under poverty and how they could make the comeback, becoming one of the leading economic power in the world. Rarely in the history of humanity has a nation traveled a path from poverty to riches so quickly or completely. How did Singapore do it ? What are the secrets to Singapore success? Till 1965, poverty was a huge problem in Singapore. The dying employment, and political, economic and racial tension being such an issue that Malaysia decided to part ways with Singapore. While we try to understand as to what help Singapore succeed in the early years, the following few factors out of many, were responsible to bring about that change.
1. Effective Government policy
2. Business friendly environment
3. Social stability in a multicultural nature.
4. Stringent rules
Envisioning a great economic future for the Nagas, jolted by the way in which our world are transforming, we should be tuned towards that change that will require a paradigm shift so as to catch up with the rest of the world. While we try to understand the possibility of that adaptation, let us resolve to bring about that change not just by clinging on a rope that leads us nowhere but having to fight with all odds to bring that economic freedom for the Nagas. The Government is responsible to bring about the right policy for the State if we wish to remain significant for the stake holders in particular and the Country in general. May the right wisdom prevail, uninfluenced by any sector and let the Government take the right steps forward towards the future that will pave the way for the younger generations to live and contribute with heads held high. BAN sincerely hopes that today’s policy makers would keep in mind, while framing policies, the urgency of building a robust economy by providing avenues for younger generation to engage in activities within their native place. It is time we break free of the shackles of begging with New Delhi for running of the affairs of the state.
L Mongkum Jamir,
President BAN,
Dr Yan Murry, General
Secretary, BAN