What changed
SEBI standardized rating symbols and definitions for all credit rating agencies, effective June 15, 2011. Long-term rating symbols now carry the agency's name as a prefix (e.g., CRISIL AAA). Short-term ratings moved to a uniform A1-A4 and D scale, replacing earlier symbols like P1-P5. The four accredited CRAs have updated their symbols accordingly.
What it means for you
Banks must update their internal systems to map the new rating symbols to the same risk weights as before under the Standardised Approach of Basel II. The change is purely cosmetic—rating methodology and existing ratings remain unaffected. This ensures consistency across agencies and aligns with SEBI's harmonization effort.
What you must do
- Update risk-weight mapping tables to reflect the new rating symbols for all four accredited CRAs.
- Train credit and risk teams on the revised symbols, especially the prefix addition for long-term and the A1-A4/D scale for short-term.
- Ensure that new exposures and reviews use the revised symbols from the date of this circular.
- Verify that existing exposures continue to use the same risk weights as before, as ratings remain unchanged.
Who it affects
All scheduled commercial banks (excluding LABs and RRBs), Credit risk management teams, Treasury and investment departments, Compliance and regulatory reporting units
Do the revised rating symbols change the risk weights for our existing loan exposures?
No. The circular explicitly states that the rating methodology and existing ratings remain unchanged. Only the symbols have been revised; the corresponding risk weights under the Basel II Standardised Approach stay the same.
How should we handle short-term ratings that were previously P1, P2, etc.?
Map the old short-term symbols to the new A1-A4 scale as per the annex in the circular. For example, P1 becomes A1, P2 becomes A2, and so on. The risk weight for each category remains identical.
Is this change applicable only to new ratings or also to existing ones?
The circular advises banks to use the revised symbols for new ratings and reviews going forward. Existing ratings retain their original symbols and risk weights until they are reviewed or renewed.