Millennium Post

Banks may also use SMERA ratings to assess loan risks

The Reserve Bank has said banks may use ratings of SME Rating Agency of India (SMERA), in addition to grades provided by other agencies, to assign risks to loans for the purpose of computing capital adequacy requirements.

‘It has now been decided that banks may also use the ratings of the SME Rating Agency of India Ltd (SMERA) for the purpose of risk weighting their claims for capital adequacy purposes in addition to the existing five domestic credit rating agencies,’ the RBI said.

Currently, CARE, CRISIL, FITCH India, ICRA and Brickwork are authorised by the RBI to provide risk weight.

Under the system, the balance sheet assets, non-funded items and other off-balance sheet exposures are assigned prescribed risk weights and banks have to maintain unimpaired minimum capital funds equivalent to the prescribed ratio on the aggregate of the risk weighted assets and other exposures.
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