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RBI regulates use of Credit Ratings

Published on October 11, 2022
Current Context: Reserve Bank of India provides new guidelines for existing credit ratings.
RBI regulates use of Credit Ratings
  • The new credit ratings are assigned to loans where the name of the lending institution is not disclosed.
  • When this information is not provided, it leads to banks applying derived risk weights for unrated exposures.
  • The regulation of RBI refers to the External Credit Assessment Institutions which provide ratings to debt.
  • Primarily, banks use the ratings assigned to debt in order to calculate risk weightage on urate loans that are provided to the companies.
  • These ratings are then used to determine the extent of capital set aside.
  • When any violation is committed, the lending situation will need to set aside more capital as RBI has prescribed a comparatively higher risk weightage for credit ratings.


Q.1 To which institutions does RBI regulation refer?
a. Internal Debit Assessment Institutions
b. External Debit Assessment Institutions
c. External Credit Assessment Institutions
d. Internal Credit Assessment Institutions

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