The government is set to streamline all financial transactions, including those made by individuals, under a comprehensive safety framework. This will be enforced once the Secured Transactions (First Amendment) Bill, 2023, approved by the House of Representatives on Monday, receives authentication from the president.
The Secured Transactions Bill, 2023, introduces provisions allowing banks and financial institutions to issue loans using movable assets as collateral. The amendment expands the scope to include both movable and immovable, as well as tangible and intangible assets, ensuring broader financial flexibility.
Addressing the House of Representatives, Finance Minister Bishnu Prasad Paudel emphasized the necessity of the amendment, citing shifting economic dimensions due to globalization, economic liberalization, and advancements in information technology. He stated that the bill will facilitate secured transactions by individuals and organizations at both domestic and international levels.
Under the new law, banks and financial institutions will be permitted to accept a wider range of movable assets as collateral, including machinery, minerals approved for excavation, intellectual property, livestock, agricultural crops, and processed food products. However, consumer goods remain excluded from the list of acceptable collateral.
Currently, the Secured Transactions Act, 2006, regulates liabilities tied to movable and intangible assets. Under existing regulations, banks and financial institutions could generally issue loans only against immovable property, except in limited cases approved by the central bank. With this amendment, the financial sector gains flexibility, allowing individuals and businesses to access loans against a broader range of assets, thereby enhancing credit availability and supporting economic growth.
Additionally, the bill facilitates transactions backed by financial instruments such as letters of credit, exchange bills, and similar credit guarantees. It also introduces safety measures for cash transactions in export and import businesses.
The bill proposes establishing a registrar’s office to oversee financial transactions at an individual level. To ensure secure transactions, any personal transaction backed by movable or immovable assets must be recorded on a dedicated web portal maintained by the registrar’s office. In the event of a default, the authority will have the power to seize the secured assets.
Currently, secured transaction laws are mainly applied by hire-purchase companies for vehicle mortgages, with oversight provided by the Credit Information Bureau. The amended law aims to extend secured financial transactions to a broader section of the public.
Having been endorsed by the National Assembly in June 2024, the bill now awaits final authentication from the president before becoming law.
