The central bank has expanded the criteria of blacklisting of the collateral evaluators in a fresh directive.

The latest regulation regarding the blacklisting of the collateral issued by Nepal Rastra Bank (NRB) said that in case a valuator evaluates unfit collateral as proper, then also such collateral valuators will be blacklisted by Credit Information Bureau (CIB).

Earlier, if the auctioning of the collateral was able to fetch only two-thirds of the borrowed amount, the collateral valuators were blacklisted, as per NRB regulation.

The professional or agency that becomes blacklisted because of being involved in wrong valuation of collaterals will not be allowed to perform the collateral valuation for any licensed banks and financial institutions.

This directive is aimed at preventing the incidence of banks not being able to recover loans once the loans get defaulted.

If a loan is floated against bad collateral, the numbers of willful defaulters might increase, piling the loss on the banks.

source: The Himalayan Times(2011),"New NRB directive for collateral evaluators ", The Himalayan Times,5 March 2011