Make Bangladesh Bank's Valuation Panel Work for Loan Recovery
Advisory dated 7 September 2026. Revised 9 September 2026.
Situation
Bangladesh Bank has published an approved collateral valuation panel. The immediate policy question is how banks should use independent appraisals when deciding whether a troubled borrower can repay, restructure or surrender collateral. A credible valuation informs that decision; it cannot establish repayment capacity by itself.
The recommended approach is to keep appraisal and credit decisions separate, require a documented recovery comparison, and review the assignments most exposed to conflicts of interest. These are BDPolicyLab proposals, subject to the applicable banking rules.
Evidence
Circular Letter BRPD-1 No. 31, issued on 7 September, enlists 131 entities: 98 in Group A and 33 in Group B. Banks are instructed to use enlisted entities in accordance with the applicable valuation policy and subsequent Bangladesh Bank directions. Bangladesh Bank, 7 September 2026
Enlistment lasts three years. Firms must apply for renewal six months before expiry; Bangladesh Bank can delist them earlier for noncompliance or reasonable grounds. Bangladesh Bank, 7 September 2026
Annual reports are due by 15 January of the following year. The circular takes immediate effect and refers banks to the underlying valuation policy. Bangladesh Bank, 7 September 2026
These provisions establish the panel and its oversight requirements. They do not, by themselves, quantify losses, recoverable collateral or banks' capital needs.
Prescription
Assign appraisers by competence and independence
Bangladesh Bank should publish an operational guide explaining the permitted scope of each group under the applicable rules. Banks should document why the selected firm is qualified for the particular asset and require declarations of financial, ownership and prior advisory relationships with the borrower and lender. Assignment decisions should be reviewable by the bank's risk function.
The alternative is to rotate every assignment mechanically. That may reduce repeated relationships but can assign complex assets to firms without the relevant expertise. Use rotation within a qualified pool, with documented exceptions and scrutiny of repeated appointments.
Require a recovery comparison before approving a workout
For a proposed restructuring, the bank's credit committee should compare expected repayments with recoveries from available enforcement or sale options. The appraisal should identify the asset, ownership and encumbrance checks, inspection date, valuation method, supporting transactions and uncertainty. Estimates for an orderly sale should be distinguished from assumptions about a faster disposal.
Recovery estimates should deduct documented disposal costs and account for the expected time to receive cash. Where enforcement timing or market evidence is uncertain, present a range and show which assumptions change the preferred decision. Do not select a convenient collateral value simply to make an extension appear viable. The credit decision must also examine operating cash flow and the borrower's ability to meet the proposed payment schedule.
Review the decisions most exposed to error
Banks should flag large valuation changes, repeated appointments, unusual assumptions and material differences between appraised and realised recoveries for independent review. Those flags are reasons to investigate, not proof of misconduct. Supervisors should examine a sample of the underlying reports and documented credit decisions, with a process for firms to explain or challenge adverse findings.
Bank risk committees should track appraisal turnaround, conflicts disclosed, exceptions approved and subsequent cash recovery. Bangladesh Bank should use those records alongside the required annual reporting to assess whether the panel is improving decisions rather than merely increasing paperwork.
Risks and Tradeoffs
Additional reviews cost money and can delay a viable restructuring. Apply deeper scrutiny where exposure, asset complexity or conflicts justify it, and record why an urgent case proceeds before every uncertainty is resolved. A second appraisal is useful only if it adds independent evidence; multiplying reports can reproduce the same weak assumptions.
More realistic valuations could reveal provisioning or capital shortfalls. Their size depends on existing provisions, recoverable amounts and bank capital. Supervisors should require bank-specific assessments before deciding on capital action.
The strongest counterargument is that improved appraisal cannot remedy weak enforcement or an unviable business. The implementation plan should therefore judge success by better credit decisions and realised recoveries, while treating appraisal compliance as an intermediate measure.
Bottom Line
Bangladesh Bank should turn the panel into a documented decision process: qualified independent assignment, transparent valuation assumptions, comparison of recovery options and review of outcomes. Banks should retain responsibility for the credit judgment and identify which evidence would justify changing it.