What changed
RBI observed inconsistent practices across banks for property valuation and valuer appointment. It now requires a uniform, Board-approved policy for valuing both bank-owned properties and collateral. Specific rules include mandatory dual valuation for high-value properties (₹50 crore+) and stricter revaluation reserve norms for capital adequacy.
What it means for you
Co-operative banks must formalize their valuation processes to ensure realistic asset pricing, directly impacting capital adequacy calculations. The 55% discount on revaluation reserves for Tier II capital remains, but banks must now prove reserves reflect true market value. This reduces scope for inflated collateral values and strengthens risk management.
What you must do
- Get Board approval for a comprehensive property valuation policy covering collateral and own assets.
- Ensure all valuations are done by independent, professionally qualified valuers with no conflict of interest.
- Obtain two independent valuation reports for any property valued at ₹50 crore or above.
- Create and maintain a register of empanelled valuers with minimum qualifications aligned to Wealth Tax Act norms.
- Review revaluation frequency and depreciation methods to reflect fair value changes and consumption patterns.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), Bank boards and risk management teams, Valuation and credit departments, External valuers empanelled by banks
What is the minimum number of valuation reports needed for high-value properties?
For properties valued at ₹50 crore or above, banks must obtain at least two independent valuation reports from professionally qualified valuers.
Can a bank use its own employee as a valuer?
No, the valuer must be independent with no direct or indirect interest in the property being valued. Banks should empanel external professional valuers.
How does revaluation affect capital adequacy?
Revaluation reserves can be included in Tier II capital only after a 55% discount, and only if the revaluation reflects true market appreciation as per a Board-approved policy.