RBI asks co-op banks to get independent valuations of high-value property

04 June 2009

The Reserve Bank of India has directed co-operative banks to obtain minimum two independent valuation reports for properties valued at Rs50 crore or above.

As of now, different banks follow different policies for valuation of properties and appointment of valuers for the purpose, RBI noted.

''The issue of correct and realistic valuation of fixed assets owned by banks and that accepted by them as collateral for a sizable portion of their advances portfolio assumes significance in view of its implications for correct measurement of capital adequacy position of banks. In this context, there is a need for putting in place a system/procedure for realistic valuation of fixed assets and also for empanelment of valuers for the purpose,'' RBI said in a notification to district central co-operative banks (DCCBs).

While formulating a policy on valuation of properties and appointment of valuers, banks should be guided by the following aspects RBI said banks should obtain minimum two independent valuation reports for properties valued at Rs50 crore or above.

Banks should have a board-approved policy in place for valuation of properties including collaterals accepted for their exposures. The valuation should be done by professionally qualified independent valuers, i.e., the valuer should not have a direct or indirect interest.

In addition to the above, RBI noted the extant guidelines on capital adequacy permit banks to include revaluation reserves at a discount of 55 per cent as a part of Tier II capital.