Enacting SARFAESI Act Attempt to Dilute Article 370, says Experts
KN DESK; 14, May 2013: Chief Minister Omar Abdullah’s recent assurance to RBI Governor to bring an ordinance to make SARFAESI Act applicable in Jammu and Kashmir or enact a similar act has evoked strong reaction from experts and academicians. The Act if extended or enforced, they say, will have serious impact on state’s Autonomy as it will dilute Article 370 which accords a special status to J&K in the Indian Constitution.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002, allows banks and financial institutions of India to own and auction properties—both residential and commercial—when borrowers fail to repay their loans.
The Act is not applicable to J&K as non-state subjects cannot own property in the state because of the Article 370.
Former chairman of J&K Bank and a leading economist, Haseeb Drabu has said the SARFAEASI Act will jeopardize the special status of the state.
Drabu in an article in ‘Mint’ newspaper, titled ‘RBI’s misplaced agenda in J&K’ has written that the argument saying inapplicability of the SARFAESI hampers lending in the state “is at best a partial truth.”
“SARFAESI is neither a necessary nor a sufficient condition for bank lending. At worst, inapplicability of SARFAESI should increase the risk of lending in J&K which, in turn, should have an impact on the pricing of loans and not the volume of lending,” Drabu wrote.
Last week, RBI Governor D Subbarao, during his Valley visit said Omar Abdullah had assured him that state government will enact SARFAESI Act in the Assembly or extend it through an ordinance shortly. RBI Governor was replying to a question in a press conference regarding the poor performance of banks in terms of Cash Deposit Ratio. He said the banks blame absence of SARFAESI Act for not lending in J&K, as it does not allow them to take over the property of the defaulting borrowers.
If the SARFAESI Act is implemented, Drabu argued, it will be RBI’s second initiative vis-à-vis J&K, which will weaken the state’s autonomy. “First, of course, was RBI’s replacement of the J&K Bank as the lender of last resort for the state government. This eroded the financial underpinning of the unique position of political autonomy that the state enjoys,” Drabu said.
Shakeel Qalandar, former president of Federation Chamber of Industries Kashmir expressed surprise over the assurance of Omar Abdullah to the RBI Governor, saying it is a “severe attempt to dilute the Article 370, but any attempt to do that would be opposed.”
“You are giving an authority to a non-state subject for holding the rights of property within state. In case of any defaults, banks can take over the property or they can sell it out to any other person not necessarily a state subject,” said Qalandar, adding, “We suggest to state government that they should not take any such decision in haste.”
Qalandar said the impression is given that SARFAESI Act will enhance the lending in state. But it is other way round, he said. “It will only give powers to outsiders to buy and sell property here, so it should be unacceptable to anybody in the state.”
Qalandar said it is “shameful” that in a state where economic vibration is needed, most the CD Ratio is just 36%. “Banks are not interested in the flow of credit to Kashmiri entrepreneurs. Instead of enacting such acts government should enact an act, which makes banks accountable for siphoning off the state’s money,” he said.
Prof Mohi-ud-Din Sangmi, HoD Business and Financial Studies at University of Kashmir said it is not because of the absence of SARFAESI Act that CD Ratio is poor in the state; rather these banks are not interested in lending within the state.
“There is a psyche working behind these nationalised and private banks, which don’t want to lend in the state. If we see 20 years before, when there was no Sarfaesi Act in India, the lending by the banks in the state was very good,” he said.
Sangami said that RBI’s claim that it cannot force banks to improve the CD Ratio in the state does not hold much water. RBI can take number of measures, which will compel banks to increase the lending.
“Politically they failed to dilute Article 370, now they have taken economic root to grab Kashmir land,” a private school female teacher posted on Facebook
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002, allows banks and financial institutions of India to own and auction properties—both residential and commercial—when borrowers fail to repay their loans.
The Act is not applicable to J&K as non-state subjects cannot own property in the state because of the Article 370.
Former chairman of J&K Bank and a leading economist, Haseeb Drabu has said the SARFAEASI Act will jeopardize the special status of the state.
Drabu in an article in ‘Mint’ newspaper, titled ‘RBI’s misplaced agenda in J&K’ has written that the argument saying inapplicability of the SARFAESI hampers lending in the state “is at best a partial truth.”
“SARFAESI is neither a necessary nor a sufficient condition for bank lending. At worst, inapplicability of SARFAESI should increase the risk of lending in J&K which, in turn, should have an impact on the pricing of loans and not the volume of lending,” Drabu wrote.
Last week, RBI Governor D Subbarao, during his Valley visit said Omar Abdullah had assured him that state government will enact SARFAESI Act in the Assembly or extend it through an ordinance shortly. RBI Governor was replying to a question in a press conference regarding the poor performance of banks in terms of Cash Deposit Ratio. He said the banks blame absence of SARFAESI Act for not lending in J&K, as it does not allow them to take over the property of the defaulting borrowers.
If the SARFAESI Act is implemented, Drabu argued, it will be RBI’s second initiative vis-à-vis J&K, which will weaken the state’s autonomy. “First, of course, was RBI’s replacement of the J&K Bank as the lender of last resort for the state government. This eroded the financial underpinning of the unique position of political autonomy that the state enjoys,” Drabu said.
Shakeel Qalandar, former president of Federation Chamber of Industries Kashmir expressed surprise over the assurance of Omar Abdullah to the RBI Governor, saying it is a “severe attempt to dilute the Article 370, but any attempt to do that would be opposed.”
“You are giving an authority to a non-state subject for holding the rights of property within state. In case of any defaults, banks can take over the property or they can sell it out to any other person not necessarily a state subject,” said Qalandar, adding, “We suggest to state government that they should not take any such decision in haste.”
Qalandar said the impression is given that SARFAESI Act will enhance the lending in state. But it is other way round, he said. “It will only give powers to outsiders to buy and sell property here, so it should be unacceptable to anybody in the state.”
Qalandar said it is “shameful” that in a state where economic vibration is needed, most the CD Ratio is just 36%. “Banks are not interested in the flow of credit to Kashmiri entrepreneurs. Instead of enacting such acts government should enact an act, which makes banks accountable for siphoning off the state’s money,” he said.
Prof Mohi-ud-Din Sangmi, HoD Business and Financial Studies at University of Kashmir said it is not because of the absence of SARFAESI Act that CD Ratio is poor in the state; rather these banks are not interested in lending within the state.
“There is a psyche working behind these nationalised and private banks, which don’t want to lend in the state. If we see 20 years before, when there was no Sarfaesi Act in India, the lending by the banks in the state was very good,” he said.
Sangami said that RBI’s claim that it cannot force banks to improve the CD Ratio in the state does not hold much water. RBI can take number of measures, which will compel banks to increase the lending.
“Politically they failed to dilute Article 370, now they have taken economic root to grab Kashmir land,” a private school female teacher posted on Facebook
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