The government is preparing a new legal framework titled the 'Distressed Asset Management Act, 2026' to expedite the recovery of defaulted loans and manage long-stuck assets across banks and non-bank financial institutions.

Stakeholder feedback on the draft law has already been gathered by the Ministry of Finance.

Under the proposed legislation, specialized companies will be granted legal authority to seize and sell pledged or mortgaged assets if borrowers fail to clear their outstanding debts within the stipulated deadline.

The law will also allow licensed entities to purchase defaulted loans and distressed assets, restructure them, execute securitization, and, if necessary, take over the management and operational control of the borrower's business.

A senior official at the Ministry of Finance stated that the primary objective of the law is the rapid recovery of non-performing loans (NPLs) and stuck assets. Once implemented, it will create a specialized operational framework allowing licensed firms to acquire distressed assets directly from financial institutions, restructure them, or sell them off.

However, officials acknowledged that actual cash recovery will pose a significant operational challenge.

According to source details, an independent regulatory body named the 'Distressed Asset Management Unit' (DAMU) will be established under the act.

While operating under the administrative supervision of Bangladesh Bank, DAMU will function autonomously in exercising its statutory powers. Headquartered in Dhaka, the unit will be permitted to open regional offices as needed.

DAMU’s core mandate will involve licensing, supervising, inspecting, and regulating Distressed Asset Management Companies (DAMCs) and Loan Servicer Companies. It will hold the authority to suspend or revoke licenses and impose administrative sanctions for violations of licensing conditions.

In addition, DAMU will oversee the registration, classification, acquisition, valuation, and supervision of distressed assets while managing a centralized digital database. It will also coordinate operations among financial institutions, DAMCs, and qualified institutional buyers.

To maintain regulatory oversight, DAMU will have the authority to demand transaction records and operational reports, as well as conduct audits, inspections, and formal investigations into the activities of DAMCs and loan servicing companies.