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Risk Management Credit Rating
What is a credit rating in the context of bank lending?
A credit rating is a standardized assessment of a borrower's creditworthiness and likelihood of default, expressed as a grade or score based on financial and non-financial parameters.
What is the purpose of a credit risk rating system in a commercial bank?
To quantify borrower default risk and guide lending decisions.
Which RBI guidelines mandate the use of internal credit rating systems by banks in India?
RBI's guidelines on the Internal Ratings-Based (IRB) approach under Basel II/III framework mandate banks to develop robust internal credit rating models for risk-based capital allocation.
What is the minimum number of rating grades recommended by RBI for internal credit rating systems?
Banks should have at least 8 borrower grades for non-defaulted accounts.
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