Guidelines for valuation of property and assets & liabilities in case of mergers

The independent auditors (Chartered Accountants) appointed by the transferee bank with the concurrence of DICGC should value the property and assets and reckon the liabilities of the transferor bank in accordance with the following provisions:

1 Cash & bank balances

Cash & bank balances are to be reckoned at their book value unless there is reasonable doubt about the repayment of deposits by the banks with which such balances are held. In the latter case, the realizable value of the deposits may be ascertained and reckoned, taking into account the financial position of the bank concerned and the facts and circumstances relevant for such assessment.

2 Investments

i) Investments including Government securities shall be valued at the market rates prevailing on the day immediately preceding the date of merger or at the rate as prescribed by Reserve Bank of India under investment guidelines, provided that the securities of the Central Government such as Post Office Certificates, Treasury Savings Deposit Certificates and any other securities or certificates issued under the Small Saving Scheme of the Central Government shall be valued at their face value or the encashable value as on the date of merger, whichever is higher.

ii) Where the market value of any Government Security such as the Zamindari Abolition Bonds or other similar security in respect of which the Principal is payable in installments, is not ascertainable or is for any reason not considered reflecting the fair value thereof or as otherwise appropriate, the security shall be valued at such an amount as is considered reasonable having regard to the installments of principal and interest remaining to be paid, the period during which such installments are payable, the yield of any security issued by the Government to which the security pertains and having the same or approximately the same maturity and other relevant factors.

iii) Where the market value of any security, share, debenture, bond or other investment is not considered reasonable by reason of its having been affected by abnormal factors, the investment may be valued as per the extant valuation guidelines endorsed by Reserve Bank of India.

iv) Where the market value of any security, share, debenture, bond or other investment is not ascertainable, only such value, if any, shall be taken into account as is considered reasonable, having regard to the financial position of the issuing concern, the dividends paid by...

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