In brief
The rules of thumb banks apply to report age, RBI expectations on periodic revaluation, and the events that trigger a fresh valuation regardless of date.
Most banks treat a valuation report as valid for 6–12 months for sanction purposes and require revaluation at least every three years for existing exposures; certain events trigger a fresh valuation immediately.
For a new loan
Banks generally will not sanction against a report older than six months (some allow twelve). A fresh valuation is also required if the property or plant has changed materially since the report — additional construction, damage, or partial sale.
For an existing loan
RBI expects periodic revaluation of immovable property held as security, and bank boards typically fix a three-year cycle, shorter for large or stressed accounts. Revaluation is mandatory on restructuring, on NPA classification and before any sale of security under SARFAESI.
- Fresh sanction3–6 months
- Takeover of a loan3–6 months
- Restructuring or recoveryup to 12 months
- Periodic revaluation of securityevery 3 years
Indicative lender norms. Each bank’s credit policy sets its own limit; a material event always triggers a fresh report.
Events that trigger a new valuation
- Change of use or zoning, or new encumbrance
- Significant market movement in the locality
- Change in the plant’s operating status (shutdown, capacity addition)
- Enhancement of the loan or takeover by another lender
Kakode & Associates’ reports state the valuation date, the assumptions and a validity note so the credit team can see at a glance whether an update is due. See Asset & Business Valuation.
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