What changed
RBI observed inconsistent valuation practices across RRBs and issued a circular on June 22, 2009, requiring a standardized Board-approved policy for property valuation and valuer empanelment. Key mandates include obtaining two independent valuation reports for properties valued at ₹50 crore or above, and ensuring valuers are professionally qualified and independent.
What it means for you
RRBs must now formalize their valuation processes to improve capital adequacy measurement and risk management. The requirement for two valuations on high-value properties reduces reliance on a single opinion, while the empanelment framework ensures valuers meet minimum qualifications. Revaluation reserves for Tier II capital must reflect true market appreciation, with depreciation methods aligned to asset consumption patterns.
What you must do
- Formulate a Board-approved policy for property valuation, covering collateral and own fixed assets, with clear procedures for revaluation and depreciation.
- Obtain at least two independent valuation reports for any property valued at ₹50 crore or above.
- Establish a formal empanelment process for valuers, including minimum qualifications per asset class, referencing Wealth Tax Act standards.
- Maintain a register of approved valuers and ensure no direct or indirect interest in the assets being valued.
- Align revaluation frequency with observed price volatility and adjust depreciation methods to reflect expected economic benefits.
Who it affects
Regional Rural Banks (RRBs), RRB Board of Directors, Credit and risk management teams at RRBs, Property valuers empaneled by RRBs
What is the threshold for requiring two independent valuation reports?
Properties valued at ₹50 crore or above must have at least two independent valuation reports.
Can RRBs use the same valuer for multiple properties?
Yes, but the valuer must be independent with no direct or indirect interest in the property being valued, and must be from the approved list.
How should revaluation reserves be treated for capital adequacy?
Revaluation reserves can be included in Tier II capital at a 55% discount, but only if they represent true market appreciation as per a comprehensive revaluation policy.