Act on Using Movable Assets as Collateral Passed by the Bangladesh ParliamentDecember 4, 2023
In Bangladesh, securing a loan from a bank typically requires providing collateral, with immovable property being the preferred and most secure form of security. However, challenges arise when banks consider other movable assets as collateral.
This legislation aims to address these issues by streamlining lending using movable property as collateral and establishing legal protections for transactions between lenders and borrowers. It is applicable to various entities engaged in lending, including banks, financial institutions, insurance companies, microfinance institutions, and money lenders.
The Act outlines the specific types of movable properties accepted as collateral and establishes guidelines for collateral valuation, the loan application process, and the registration of financing statements. It also introduces provisions for a registration authority responsible for maintaining an electronic database of registered financing statements related to movable property collateral.
Detailing the process for creating, perfecting, fulfilling, and prioritizing security interests in movable collateral, the Act establishes that registration generally determines priority, with some exceptions. It addresses the priority of court orders and decrees.
The rights and responsibilities of secured parties and debtors are defined, particularly in the event of default, allowing for dispute resolution through negotiations, compromise, or court settlement.
The Act includes provisions related to the preservation of registration records, issuance of certificates, termination of registration, and the treatment of proceeds and income from collateral. It grants rule-making powers to the government and regulation-making powers to the registration authority, with the flexibility for the government to amend schedules through notifications. With the implementation of this Act, it is anticipated that more individuals will have the opportunity to secure loans by using their movable assets as collateral.