Private firms can buy bad loans from banks, seize mortgaged assets and take over indebted companies under legal provisions readied for enactment, sources say about the desperate remedy for deep-rooted ailment.
A formal market is proposed to be created for buy and sale of bad loans from banks, at a time when commercial banks are burdened with high concentrations of non-performing loans (NPLs).
A new central bank-drafted law moves further to propose inviting both domestic and foreign investors to invest capital in the sluggish banking sector to give a shot in its arm.
The Bangladesh Bank has urged the finance minister to take necessary steps to place the proposed amendment to the Artha Rin Adalat Ain 2003 and the new Distressed Asset Management Act (DAMA) 2026 before parliament during its ongoing session, out of exigency.
The proposed amendment and new law are aimed at making the recovery of defaulted loans more effective, dynamic and time-befitting, while facilitating the management, restructuring and settlement of distressed assets of banks and financial institutions.
Bangladesh Bank Governor Md. Mostaqur Rahman has issued a Demi-Official (DO) letter to the finance minister requesting the enactment of the proposed amendments to the Money Loan Court Act as well as the proposed new DAMA during the ongoing session of parliament.
The central bank has already sent drafts of the two laws to the Financial Institutions Division of the Ministry of Finance for necessary action, according to a letter sent to the ministry.
In the letter, the central bank has said the proposed laws would help accelerate loan recovery, improve the quality of banks and financial institutions’ balance sheets and strengthen good governance in the country’s banking sector, roiled by past irregularities.
The banking-sector regulator has also sought the ministry’s initiative to place the two legislative proposals before the ongoing parliamentary session with the belief that their enactment would contribute to financial stability and help accelerate overall economic activities.
The central bank chief also has written that, soon after assuming office, he took several effective initiatives to revitalise the economy, including reopening closed and capital-starved industrial units to create employment, restoring depositor confidence by reestablishing good governance in the banking sector, expanding the digital economy and raising foreign-exchange reserves to the desired level.
“Nevertheless, the high level of NPLs and distressed assets in the banking sector continues to undermine overall financial stability in the country,” the governor notes.
The latest BB move comes as a high level of non-performing loans (NPLs) and distressed assets continues to pose a major challenge to stability in the country’s banking sector despite the central bank’s different policy supports.
The classified loans in the country’s banking sector ballooned to Tk 5.89 trillion as of March 2026, accounting for 32.26 per cent of the entire loans worth Tk 18.25 trillion disbursed by all scheduled banks.
The main objective of the DAMA is to create a formal market for buying and selling bad loans. The law also aims to attract both domestic and foreign investors and strengthen the financial system.
The proposed DAMA would allow private firms to purchase bad loans from banks, seize mortgaged assets and take control of indebted companies.
The draft also proposes establishing an independent regulator, Distressed Asset Management Unit (DAMU), under the oversight of the central bank.
It would also have the authority to establish a special enforcement body, styled Distressed Asset Enforcement Taskforce (DAET).
The government has taken an initiative to enact the DAMA in line with recommendations from the World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB) to improve the efficiency of managing classified loans and distressed assets in the banking sector, according to officials familiar with the developments.
They also said the central bank recommended settling cases related to the Artha Rin Adalat Ain or Money Loan Court Act within the timeframe of six months.
The draft law also proposes forming Appeal Tribunal, determining reserve prices in auction, appointing recovery officer in execution cases and for filing appeal to increase the amount of deposit money.
Source: https://thefinancialexpress.com.bd/economy/bank-bad-loans-indebted-cos-can-be-auctioned
