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Valuation of securities - bank loans

SSG (1936 Points)

02 August 2015

In case of NPA loans, the valuation of securities must be done once in three years. In performing loans, what is the period of valuation of collateral securites?

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C.A. P. HAREESH KUMAR (PRACTICE) (375 Points)
Replied 06 August 2015

Shyam Sunderji

Let me explain what I had seen in practical situations in relation to tangible assets being Land / & Building whether offerd as primary or collateral security . Different Banks follow different policies in this regard . Certain Banks insist for fresh valuation once in 3 Years and some other banks once in 2 years ( Bank's mangement is free to frame this ) . Certain Banks insist for at least 2 independent valuations by their panel valuers ( For eg . SBI in the case big borrower a/cs ) . Some private sector Banks ( ICICI) have their own internal valuers whose report alone is considered . This frequency is set generally for all loans irrespective of whether it has fallen into NPA or not .

However in a case where the A/c has fallen into NPA it would be considered prudent to take a fresh valuation and such practices were seen as followed .

Kindly go through this and revert

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SSG (1936 Points)
Replied 06 August 2015

Thanks Hareesh Sir for your guidance. So in the case of a collateral security of CC Loan - Residential Property, if valuation report is more than 3 years old, then should that account be a NPA. What will be the implications of this?