ICRA in MoU with Indian Bank to rate Bank Loans under RBI's New Capital Adequacy Framework for Basle-III & SSI / SME Borrowers

ICRA Ltd has announced that the Company and Indian Bank (Bank), a premier nationalised bank headquartered in Chennai, have signed a Memorandum of Understanding (MoU) under which the Company will assign ratings to the Bank's loans and its other exposures under the standardized approach of RBI's New Capital Adequacy Framework for Basel-II and also to Small Scale Industries (SSIs) and Small and Medium Enterprises (SMEs).

The Company's ratings for the standardized approach would be carried out under its "Line of Credit" rating service and would enable the Bank to assess the new risk weights applicable to its borrowers under Basel-II. The risk weights would be linked to the various rating categories and would be as per RBI's above guideline.

The SSI ratings will be carried out under the National Small Industries Corporation-ICRA (NSIC-ICRA) Performance and Credit Rating Scheme for SSIs. The SME ratings on the other hand will be assigned under the ICRA-SME Rating Scale.

To assist potential and existing borrowers of the Bank in obtaining ratings, the Company is offering special terms to the clients of the Bank covered by the MoU.

The MoU between the Company and the Bank seeks to deliver a number of benefits to the Bank as well its Clients. For the Bank, the Company's Line of Credit ratings would assist in implementing RBI's New Capital Adequacy Framework under Basle-II. The Company's SSI/SME ratings would serve as an objective and scientific input in decision making, assist in risk pricing; serve as an input for setting collateral requirements for borrowers and facilitate future CBO/CLO deals. The Company rating may also place the rated entity in a superior position in terms of faster loan processing and to obtain competitive credit terms from the Bank.

Source : Equity Bulls

Keywords