What changed
RBI updated the list of eligible domestic credit rating agencies for risk-weighting bank claims under Basel III capital regulations. The new list includes Acuite, CARE, CRISIL, ICRA, India Ratings, and INFOMERICS, replacing the previous list from the April 2022 Master Circular. Additionally, the restriction on using Brickwork Ratings for fresh ratings, as per the October 2022 press release, continues to apply.
What it means for you
Banks must now use only the specified six agencies for external credit ratings to determine risk weights for capital adequacy. This ensures consistency and reliability in risk assessment. The ongoing ban on Brickwork Ratings means any existing exposures rated by them may need review, and no new ratings from them should be accepted.
What you must do
- Update your internal systems and risk-weighting models to reflect only the six approved rating agencies.
- Ensure no fresh credit ratings or evaluations are obtained from Brickwork Ratings India Private Limited.
- Review existing exposures rated by Brickwork Ratings and plan for re-rating or alternative risk assessment.
- Communicate the updated list to all relevant credit and risk management teams.
Who it affects
All Scheduled Commercial Banks (including Small Finance Banks), Credit risk management teams, Loan origination and portfolio monitoring departments
Can we still use existing ratings from Brickwork Ratings for capital adequacy?
The circular does not explicitly address existing ratings, but the press release advises against obtaining fresh ratings from Brickwork. For existing exposures, banks should assess the need for re-rating or alternative risk-weighting methods as per RBI guidelines.
Are there any changes to the risk-weighting methodology itself?
No, only the list of eligible rating agencies has been updated. All other provisions regarding external credit ratings from the April 2022 Master Circular remain unchanged.