Every Bank has a Board approved policy in place for valuation of properties including collaterals accepted for their exposures.
The valuation of properties should be done by professionally qualified independent Valuers i.e., the Valuer should not have a direct or indirect interest on assessed property or in the account. In the case of Valuation Reports for properties valued at ₹50 crore or above, banks should obtain minimum two Independent Valuation Reports.
Revaluation policy of fixed assets:
The revaluation policy of fixed assets should, inter alia, cover procedure for identification of assets for revaluation, maintenance of separate set of records for such assets, the frequency of revaluation, depreciation policy for such assets, policy for sale of such revalued assets, etc. The policy should also cover the disclosure required to be made in the ‘Notes on Account’ regarding the details of revaluation such as the original cost of the fixed assets subject to revaluation and accounting treatment for appreciation / depreciation etc. As the revaluation should reflect the change in the fair value of the fixed asset, the frequency of revaluation should be determined based on the observed volatility in the prices of the assets in the past. Further, any change in the method of depreciation should reflect the change in the expected pattern of consumption of the future economic benefits of the assets. The banks should adhere to these principles meticulously while changing the frequency of revaluation / method of depreciation for a particular class of asset and should make proper disclosures in this regard.
Empanelment of Valuers :
Banks may be guided by the following aspects while formulating a policy on appointment of Valuers:
The Board approved policy for appointments of Valuers may prescribe a minimum qualification for empanelment of Valuers. Different qualifications may be prescribed for different classes of assets (e.g. land & building, plant & machinery, agricultural land, etc). While prescribing the qualification, banks may take into consideration the qualifications prescribed under Section 34AB (Rule 8A) of the Wealth Tax Act, 1957. Banks may also be guided by the relevant Accounting Standard issued by the Institute of Chartered Accountants of India.
A register of approved list of Valuers shall be maintained by the Bank.