Borrowing money to get easier
From now on, moveable properties could also be produced as collateral. Even private cars can be mortgaged for loans. The bank will provide loans after examining the model number, value, loan tenure and its depreciation value.
A borrower will no longer need to depend on immovable properties to get a bank loan, with the government moving to ease the lending system by allowing moveable properties -- such as savings certificates, fixed deposits, copyrights or even agricultural production -- to be used as collateral too.
Financial Institutions Division (FID) presented the Secured Transaction (Moveable Property) Act, 2022 with these provisions at a cabinet meeting held at Jatiya Sangsad Bhaban yesterday.
Prime Minister Sheikh Hasina, who chaired the meeting, approved the act in principle.
"It will increase credit flow in the market and reduce conflict between borrowers and lenders regarding collateral," said Prof Md Main Uddin, chair of the banking and insurance department at Dhaka University.
"The conflicts can be resolved through this act. However, banks need to increase their inspection to prevent loan forgery and defaults," he added.
Executive Director of Policy Research Institute Ahsan H Mansur said, "It will turn out to be a good move if insurance is added to mitigate risks."
Later in a briefing, cabinet secretary Khandker Anwarul Islam said, "From now on, moveable properties could also be produced as collateral."
"Even private cars can be mortgaged for loans. The bank will provide loans after examining the model number, value, loan tenure and its depreciation value," said the cabinet secretary.
"The cabinet has discussed the matter at length," he added.
Pointing out the act's purpose, Anwarul said many small and medium entrepreneurs cannot show fixed properties as collateral. They will be able to avail loans by mortgaging any kind of moveable property.
"It will definitely increase investment," he added.
Replying to a query about many banks already giving loans against such collateral, the cabinet secretary said this practice will be brought under a legal framework through the act.
"If the bank does fair appraisals, chances of forgery will reduce," said Anwarul, when asked about possibilities of forgery.
The cabinet yesterday also approved the drafts of Government Primary School Teacher Welfare Trust Act, 2022 and National Employment Policy 2022, and approved in principle Bangladesh Nuclear Energy Commission (Revised) Act, 2022.
The cabinet secretary said the Government Primary School Teacher Welfare Trust will be an autonomous body run by 21 members.
The trust will have a separate fund, which will be deposited into a scheduled bank.
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