Ratings devoid of lenders detail should be treated as unrated exposure: RBI

Capital charge to be linked to risk weight for unrated lending

In a move that may put pressure on the capital adequacy of banks, the Reserve Bank of India (RBI) on Monday said loan ratings without information about lenders’ details should be treated as unrated exposure.
 

Capital should be set aside using risk weightings applicable for unrated exposure to companies and non-banking finance

companies.
 

The RBI said these instructions would be effective on March 31, 2023. Thus, any burden on account of higher capital charges will be in the current financial year (FY23).
 

The press releases (PRs) issued by external credit assessment institutions (ECAI) on ratings often do not have lenders’ details.