Bangladesh Bank has released a roster of 131 approved entities tasked with assessing collateral used for bank loans with the goal of standardizing asset valuation practices and preventing inflated collateral values leading to unjustified credit.
In a new directive, the central bank mandated that scheduled banks exclusively utilize these 131 listed entities for collateral valuations on loans exceeding Tk 1 crore. Loans below this threshold can still be appraised internally by the banks.
This action follows a recent policy circular issued by the central bank on November 28, 2023, which outlined the minimum requirements for valuation entities. These criteria include membership in recognized survey or accounting associations, a minimum of three years of relevant experience, and adherence to standards related to qualified engineering personnel, logistical capabilities, and clean Credit Information Bureau (CIB) records.
In the latest circular, Bangladesh Bank categorized 98 of the entities as “Group A” and the remaining 33 as “Group B” based on their evaluation scores, technical expertise, and past performance.
As per the policy guidelines, Group A entities have a wider operational scope. For loan approvals, extensions, or renewals exceeding Tk 100 crore, banks must engage at least two valuation firms, with one mandatory selection from Group A.
Moreover, if a commercial bank’s non-performing loan (NPL) ratio hits 10 percent or higher in the previous quarter, it must exclusively use Group A entities to assess collateral on loan facilities exceeding Tk 50 crore.
In cases where there is a discrepancy of more than 20 percent between two valuation reports or between an external appraisal and the bank’s internal assessment, the bank is obligated to request a formal explanation from the valuation firm.
The listing of approved entities will be valid for three years. These entities must apply for renewal six months before expiration and submit annual performance reports to the Banking Regulation and Policy Department-1 (BRPD-1) by January 15 each year.
The central bank retains the authority to remove any institution from the list due to non-compliance, professional misconduct, or falsification of asset values.
