From now onwards, non-banking assets need to be evaluated very carefully and the process should be completed through a committee comprising at least three experienced officers, says a Bangladesh Bank guideline on ownership of non-banking assets against bank loans issued on Monday.
Besides the committee comprising bank officials, assets should be assessed through a value firm or professional body. Whichever is less of the two prices determined by the professional body and the committee should be taken as the market value of the asset. Once the market value is determined, it has to be approved by the CEO of the bank.
In the past, the necessary legal process used to be done to ensure the physical possession by registering and mutating the property in the name of the bank as soon as the ownership of the mortgaged property was in favour of the bank, as per section 33 (7) of the Artha Rin Adalat Ain, 2003.
The directives also read that in the case of inclusion as a non-banking asset, the reason for the abnormal decline in the value of the asset from the latest valuation already performed by the bank must be stated. If a non-banking asset is integrated as a bank, the borrower concerned will be barred from defaulting.
However, before releasing a borrower from 'defaulter' status, approval of the Board of Directors has to be obtained with the certification – all the procedures mentioned in the policy have been duly followed – of the Head of Internal Control and Compliance of the bank concerned.
According to the central bank, in no way can the bank retain such assets for more than the stipulated period from the date of acquisition. It will take the initiative to sell the asset as soon as possible after acquiring it. If necessary, the assets (in whole or part) can be used for its banking activities.
After the inclusion of non-banking assets as a bank, the financial statements will have to show the sector of the assets separately. In addition, income-earning and non-income-earning assets should be mentioned separately among such assets.
The central bank has asked the scheduled banks to submit the relevant information in the format prescribed by the Department of Off-site Supervision of the Bangladesh Bank on a bi-monthly basis. Bankers have applauded the initiative.