The state government’s decision to constitute a committee to examine an Article 371A-compatible statutory security instrument is therefore a welcome step. The committee, in consultation with the Law and Justice Department, will explore the legal and procedural requirements for a workable framework, including whether it would require a legislative resolution, a state notification or an operating protocol through the State Level Bankers’ Committee (SLBC). It will also seek the concurrence of banks so that the proposed documentation can be accepted for credit purposes. The problem is straightforward. Banks generally prefer tangible collateral, particularly land and property, when extending loans. Where customary ownership and constitutional safeguards create legal uncertainties over the creation and enforcement of mortgages, financial institutions become reluctant to lend. Entrepreneurs are consequently denied access to capital, businesses struggle to expand, and potential investments remain unrealised. The result is a persistent shortage of productive credit, reflected in Nagaland’s low credit-deposit ratio. Money deposited in local banks does not circulate adequately within the state economy, limiting opportunities for enterprise, employment and growth. The proposed alternatives deserve serious consideration. A state-backed credit guarantee fund, including a first-loss default guarantee mechanism, could encourage banks to lend by absorbing an agreed portion of the risk. Cash-flow-based assessments could help viable businesses secure loans without depending entirely on land collateral. Better assistance with applications, sponsorship and follow-up under credit-linked schemes, including the Chief Minister’s Micro Finance Initiative, could also help entrepreneurs overcome procedural hurdles. However, such measures must be supported by sound financial assessments, transparent eligibility criteria and safeguards against misuse of public money. Equally important is the proposal to make productive lending a measurable banking priority. Setting a target for productive credit as a share of incremental lending could help ensure that improvements in the credit-deposit ratio are not driven mainly by salary-backed personal loans. The government must also examine whether the allocation of its banking business can be linked, within applicable Reserve Bank of India rules, to the performance of banks in supporting local enterprise. Public deposits and government business should contribute more meaningfully to the state’s economic development. Nevertheless, institutional adjustments alone may not be enough. The government must explore a legally sound framework that respects customary ownership and community interests while enabling legitimate borrowing. Any proposed mortgage or security instrument must be carefully examined to ensure that it does not indirectly facilitate the alienation of protected land. Digital land records, clear ownership documentation and community-consent mechanisms could improve transparency, provided they are consistent with customary practices and constitutional protections. A review of the way Article 371A operates in relation to economic activity is therefore necessary, but it should not be confused with a demand to dilute the constitutional safeguard itself. Protection of land and resources remains essential in a state where land carries social, cultural and collective significance. The objective should be to reconcile that protection with the need for investment, entrepreneurship and employment. Nagaland cannot afford to let legal uncertainty become a permanent excuse for economic stagnation. Young people need opportunities to establish businesses and create jobs at home rather than leave the state in search of livelihoods elsewhere. Article 371A should remain a shield for Naga identity, not an unintended barrier to Naga enterprise. The government must now demonstrate that constitutional protection and economic development can advance together.
The post Protective or Prohibitive first appeared on Nagaland Post.