Bangladesh Bank has published a list of 131 institutions eligible to value collateral pledged against bank loans, aiming to standardise asset appraisal across the financial sector and curb the practice of artificially inflating collateral values to secure unearned credit.
The central bank issued a circular today instructing scheduled banks to conduct collateral valuations for loans of Tk 1 crore and above exclusively through these 131 listed entities.
Loans below Tk 1 crore may continue to be valued by the banks' internal management.
The enlistment follows a central bank policy circular issued on November 28, 2023, which laid out minimum eligibility criteria for valuation entities.
The policy required candidate firms to hold membership in recognised survey or accounting associations, maintain at least three years of experience, and satisfy conditions regarding qualified engineering staff, logistics, and clean Credit Information Bureau (CIB) reports.
In today's circular, Bangladesh Bank classified 98 of the firms under "Group A" and the remaining 33 under "Group B" based on their evaluation scores, technical capacity, and track record.
Under the policy rules, Group A firms have a broader operational scope. For the sanctioning, enhancement, or renewal of loans of Tk 100 crore and above, banks must engage at least two separate valuation firms, with at least one required to be from Group A.
Additionally, if a commercial bank's non-performing loan (NPL) ratio reaches 10 percent or higher in the preceding quarter, it must exclusively employ Group A firms to evaluate collateral for any loan facility of Tk 50 crore and above.
If the variance between two valuation reports—or between an external valuation and a bank's internal assessment—exceeds 20 percent, the bank is required to seek a formal explanation from the valuation firm.
The listing will remain valid for three years. Listed firms must apply for renewal six months prior to expiry and submit annual performance reports to the Banking Regulation and Policy Department-1 (BRPD-1) by January 15 each year.
The central bank reserved the right to delist any institution for non-compliance, professional negligence, or misrepresentation of asset values.
