KATHMANDU, Feb 11: The government is set to streamline all financial transactions, including those made by individuals, to ensure that they fall under a safety framework. This new law will come into effect once the Secured Transactions (First Amendment) Bill, 2023 approved by the House of Representatives (HoR) on Monday, gets authenticated by the president.
The ‘Secured Transactions Bill, 2023’ also has provisions to facilitate Banks and Financial Institutions (BFIs) to issue loans by considering moveable assets as collateral. The amendment bill aims to expand the scope to include liabilities associated with both the movable and immovable as well as tangible and intangible assets.
Speaking at a meeting of the HoR on Monday, Finance Minister Bishnu Prasad Paudel said the amended law is necessary amid changing economic dimensions due to growing impacts of globalization, economic liberalization and development in information technology.
“It will facilitate secured transactions by individuals and organizations at the domestic and international levels,” Paudel said.
The bill talks about allowing movable assets such as machinery, minerals approved for excavation, intellectual property, livestock, agricultural crops and agricultural products including processed food, among others, to be used as collateral by the BFIs while issuing loans to their clients. It, however, excludes consumer goods under the scope of collateral.
Currently, the Secured Transactions Act, 2006, regulates liabilities tied to movable and intangible assets.
As of now, the BFIs could offer loans only against immovable property, except in a few cases permitted by the central bank. This amendment will enhance the flexibility of the financial sector, allowing individuals and businesses to receive loans against a broader range of assets, fostering greater access to credit.
Similarly, the bill also facilitates financial transactions carried out against guarantee of letter of credit, exchange bill and similar other credit instruments. It has come up with provisions to maintain safety measures for cash transactions made in export and import businesses.
The bill has envisioned setting up a registrar’s office as an oversight agency to maintain the record of the financial transactions made on an individual basis. While carrying out the personal transaction by considering securities of any moveable or immovable assets, their records should be maintained in the web portal of the registrar’s office to ensure secured transactions. “In case of defaulting in such a transaction, the authority can seize the assets considered for security,” reads the bill.
As of now, the law related to secured transactions is being entertained by the hire purchase companies while investing against vehicle mortgages. The Credit Information Bureau has been working as the oversight agency for this purpose. The amended law is expected to provide access to the secured financial transactions at the level of the general public.
The amendment bill was earlier endorsed by the National Assembly in June 2024 and now awaits authentication from the president.