The government is formulating a new legal framework titled the Distressed Asset Management Act, 2026 to accelerate the recovery of non-performing loans (NPLs) and manage long-stagnant assets in banks and non-bank financial institutions (NBFIs).
Stakeholder feedback on the draft has already been collected.
If a borrower fails to clear dues within a stipulated timeframe, specialized asset management companies will be empowered to seize and sell mortgaged collateral.
These entities can also purchase defaulted loans and distressed assets, restructure or securitize them, and assume operational control of defaulting businesses.
While finance ministry officials expect the framework to establish a specialized ecosystem for bad-asset resolution, economists warn that systemic challenges remain.
A substantial portion of defaulted loans lacks adequate collateral, while other securities are inflated up to four to five times their actual market value—making actual recovery difficult even after asset transfers.
A separate regulatory body—the Distressed Asset Management Unit (Damu)—will be set up in Dhaka under the administrative supervision of Bangladesh Bank, operating with functional autonomy.
- Mandate: Issue, monitor, suspend, or revoke licenses for Distressed Asset Management Companies (DAMCs) and Loan Servicer Companies; manage a central digital database/platform for distressed assets; conduct audits and investigations.
- Leadership: Headed by a chief recommended by the Bangladesh Bank Governor and appointed by the government for a maximum three-year term. The position carries the rank and benefits of a Deputy Governor. Candidates require at least 15 years of relevant professional experience and must be under 65 years of age.
- Enforcement: Damu can also form a specialized Distressed Asset Enforcement Task Force (Daet).
To operate, DAMCs must be registered under the Companies Act, 1994, meet cash-paid-up capital requirements set by Damu, maintain strict "fit and proper" management standards, and ensure at least 20% independent directors on their boards.
DAMCs can purchase bad debts directly from financial institutions via bilateral contracts, paying the agreed purchase price entirely in cash.
DAMCs may raise funds locally or internationally by issuing shares, bonds, debentures, and security certificates, or through joint ventures with eligible institutional investors.
DAMCs can negotiate settlements, take physical possession of mortgaged assets, lease or sell property, convert debt into equity, and assume control of defaulting firms.
They can also extend loan tenures, reduce or waive interest, and haircut principal amounts (subject to Damu approval for major write-downs). Settled borrowers will receive "no-dues certificates."
Collateral market value will be assessed by Bangladesh Bank-approved valuers to determine a reserve price.
Borrowers will receive a 60-day notice to clear dues or redeem assets at the reserve price.
Failing this, assets will be sold via public tenders, open auctions, or bilateral agreements at or above the reserve price (or re-auctioned at up to a 10% discount if initial bids fall short).
If a borrower refuses to yield physical possession, District Magistrates or designated Executive Magistrates must enforce eviction and hand over assets within 15 working days.
Distressed assets can be placed into special-purpose trusts, insulating them from the general creditors of the DAMC or the selling financial institution.
Trust claims will hold first charge and priority over all debts, including government taxes and duties.
DAMCs and banks can hire licensed loan servicer companies to assist in borrower contact, restructuring, and asset tracing.
Servicers are strictly prohibited from taking deposits, conducting banking, or using coercive/illegal recovery tactics.
Restrictions and penalties
Defaulting borrowers and affiliated individuals are strictly barred from holding ownership, management, or board roles in DAMUS, DAMCs, or loan servicers, and cannot participate in asset auctions.
Administrative fines range from Tk10 lakh to Tk1 crore for license violations. Criminal penalties include:
- Up to 7 years imprisonment or Tk1 crore fine for operating without a valid license.
- Up to 10 years imprisonment or Tk1 crore fine for providing false licensing information.
- Up to 12 years imprisonment or Tk2 crore fine (cognizable, non-compoundable, and non-bailable) for fraud, forgery, or intentional undervaluation.
The government may issue gazette notifications waiving or reducing VAT, custom duties, stamp duties, and registration fees on asset transfers.
