Such loans will ought to be dealt with with the aid of banks as unrated and they may assign hazard weights to them.
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In a round issued to all banks on Monday, the RBI mentioned that disclosures relating to creditors’ details aren’t to be had in a huge number of Press Releases (PRs) issued by using external credit evaluation institutions (ECAIs) due to the absence of requisite consent through the borrowers to the ECAIs.
“It is, therefore, recommended that a bank loan rating without the above disclosure by the ECAI shall now not be eligible for being reckoned for capital computation through banks… They (banks) shall deal with such exposures as unrated and assign relevant danger weights,” the RBI stated.
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It advised that if the applicable records isn’t always supplied, then banks might need to assign risk weights to such unrated exposures.
This should further lead to reducing of provision for capital and underpricing of dangers, the vital bank counseled similarly.
