Kashmir Inc opposes SARFAESI Act in J and K,

TOWSEEF AHMAD MAY 18:2013

Will launch agitations if need arises: KEA

Srinagar:The announcement of the government to enact the SARFAESI Act in Jammu and Kashmir has come under severe criticism from the Kashmir Inc fearing the move was a step to dilute Article 370. The Valley business community has threatened an agitation if government takes initiative for the implementation of Act in J&K.

The Kashmir traders said Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) had nothing to do with the increase in Credit Deposit Ratio (CDR) but would “only dilute the special status of the State granted under Article 370.  
Notably, Former Chairman JK Bank and a leading economist Haseeb A Drabu in his recent article in business newspaper Mint stated that 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. As such, the question that needs to be asked is how did the credit deposit ratio reach a level of 62.5% in 2008 and how did it plummet to 38% four years later?,” he wrote.

Arguing further Drabu said “how was the credit deposit ratio raised from 37.4% in 2004 to 62% in 2008? What was done right then and what has gone wrong now? Clearly, the CDR was high even though the SARFAESI was not in force.”

 “The real reason for the low level of lending in J&K is that the lending methodology adopted by commercial banks is unsuited for the structure of business enterprises in J&K,” Drabu questioned. 

 
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.

RBI Governor D Subbarao, during his recent visit to Valley said Omar Abdullah had assured him that state government would 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.

Kashmir Economic Alliance, an amalgam of trader bodies said the introduction of this Act will prove detrimental for the business fraternity of Kashmir.

 “It is unacceptable that the state government has expressed its willingness to introduce the Act.  We will launch a strong agitation and will come on roads if the need arises,” Chairman KEA Muhammad Yaseen Khan said.

Khan also said that the act will go against the constitutional safeguards guaranteed to the citizens of Jammu and Kashmir.

 “The SARFAESI Act is not presently in force in Jammu and Kashmir due to the special status the state enjoys by virtue of Article 370. But the enactment of the said Act will pave for the non-state subjects to become owners of the state property which is a clear violation of article 370,” he added.

Associated Chamber of Commerce and Industries Kashmir (CCIK ) while expressing their reservations over the enactment of SARFAESI said that the act was against the interests of the State.

 “SARFAESI is against the basic interests of Kashmir and Kashmiri people. What will we do with CDR when our interests are at stake,” said CCIK Joint Secretary Tariq Rashid.
Federation Chamber of Industries Kashmir (FCIK), a representative body of Kashmir industry and trade, opposed the implementation of the Act.

 “The government is relating two different things. SARFAESI has nothing to do with the increase in CDR. They cannot relate two different things to enact such an act that has serious implication,” said Zahoor Ahmad Bhat, President FCIK.

He said that the ordinance would pave way for the authorities (outside banks) to seize the properties of bank defaulters.

  
“The proposal of RBI will pave way for the transfer of property, land and assets into the hands of outsiders through the proposed auction violating the status granted under Article 370,” he added. 

“If any borrower fails to repay the loan under the terms of a loan obligation, they can claim the ownership rights of the collateral. It would mean that the non-state subjects will become the owners of the State land.”