Bangladesh introduces Secure Transactions Act to allow movable assets as loan collateral, expanding access to credit.

Bangladesh introduces Secure Transactions Act to allow movable assets as loan collateral, expanding access to credit.

November 20, 2023.

Banks in Bangladesh often need security for all loans. Immovable property is often regarded as the most secure type of security and is sought after by banks. When banks considered other transportable items as security, they encountered a number of issues. To address these issues, the Secure Transactions (Moveable Assets) Act, 2023 was passed by Parliament on November 13, 2023.

This Act is intended to enable lending against immovable property as collateral and to provide legal protection for such lending transactions between lenders and borrowers. It applies to banks, financial institutions, insurance companies, microfinance organizations, money lenders, and any other entities that make such loans.

The Act outlines which sorts of immovable properties can be used as collateral. It also establishes criteria for collateral appraisal, loan application procedures, and registration of financing statements.

The Act includes provisions for creating a Registration Authority to keep an electronic database of registered financing statements for immovable property collateral. It describes the information that must be included in financing statements, as well as the registration, search, and correction procedures.

The Act explains the process of creating, perfecting, fulfilling, and prioritizing security interests in immovable collateral. Except in rare cases, registration decides priority. There are provisions in place to give judicial orders and judgments priority.

The rights and obligations of secured parties and debtors are described, particularly in the event of default. Negotiation and compromise can help the parties resolve their differences. Settlement through the courts is also an option.

There are provisions for preserving registration records, issuing certificates, terminating registration, treating revenues and income from collateral, and so on.

The Act empowers the government to make rules and the Registration Authority to make regulations. The government can also change the timetables through notices.

With the implementation of the act, it is predicted that more people would be able to acquire loans using their mobile goods as collateral.