C Risk Management Credit Rating
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is a credit rating in the context of bank lending?
A credit rating is a systematic assessment of a borrower's creditworthiness, expressing the likelihood of default on financial obligations. It is assigned by internal or external rating agencies based on quantitative and qualitative factors.
What is the minimum external credit rating required for a corporate exposure to attract a 20% risk weight under RBI's Standardised Approach?
AAA or AA rating from a SEBI-recognised credit rating agency.
Which Indian regulatory body mandates the use of external credit ratings for bank lending under the Basel framework?
The Reserve Bank of India (RBI) mandates the use of external credit ratings issued by SEBI-accredited Credit Rating Agencies (CRAs) for capital adequacy computation under the Standardised Approach of Basel II/III.
What is the difference between 'investment grade' and 'speculative grade' credit ratings?
Investment grade (BBB- and above) indicates lower default risk than speculative grade.
What are the four SEBI-accredited Credit Rating Agencies recognised by RBI for capital adequacy purposes?
RBI recognises CRISIL, ICRA, CARE, and India Ratings and Research (formerly Fitch India) as eligible external credit rating agencies for regulatory capital computation purposes.
What is 'credit risk' in the context of banking and lending?
Risk of loss from a borrower's failure to repay as agreed.
What is the difference between a solicited and an unsolicited credit rating?
A solicited rating is requested and paid for by the issuer, whereas an unsolicited rating is assigned by the agency on its own initiative without a mandate from the entity being rated. RBI guidelines generally restrict use of unsolicited ratings for capital computation.
What is the purpose of 'shadow rating' in bank credit assessment?
Banks internally rate unrated borrowers using agency-equivalent rating scales.
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