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Risk Management and Credit Rating
Under the Foundation IRB (F-IRB) approach as per Basel III and RBI guidelines, which credit risk parameter do banks estimate internally?
Banks estimate PD (Probability of Default) internally, while LGD, EAD, and Maturity (M) are prescribed by supervisors.
Under the Advanced IRB (A-IRB) approach, which four credit risk parameters does a bank estimate internally?
PD, LGD, EAD, and Effective Maturity (M) — all four are estimated internally by the bank.
What does PD stand for in the context of the Internal Rating-Based approach to credit risk measurement?
PD stands for Probability of Default, which represents the likelihood that a borrower will fail to meet their debt obligations.
What risk weight does RBI assign to an unrated corporate exposure exceeding Rs 100 crore under the Standardised Approach?
150% risk weight is applied to unrated corporate exposures above Rs 100 crore.
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