CRISIL starts rating bank loans
29 Jun 2007
Mumbai: CRISIL, India's largest rating agency and a subsidiary of Standard & Poor's, has released the first bank loan ratings that will allow banks to allocate substantially lesser capital for A to AAA entities.
CRISIL has rated the bank facilities of Hero Honda, Hero Honda Finlease, NTPC, Reliance Industries, and UltraTech.
The ratings will help banks determine risk weights for their loan exposures under Basel II norms. Foreign banks and Indian banks with international presence have to adopt capital norms under Basel II by March 2008.
Banks are likely to insist on a rating for the loan to corporates, as under the Basel II norms they have to set aside more capital for unrated loans.
Until April 2009, fresh unrated loans above Rs50 crore attract a risk weight of 150 per cent. After April 1, 2009, this minimum size will be reduced to Rs10 crore, bringing many more loans within the 150 per cent risk weight bracket.
Banks can save capital on loans by getting loans rated in the A to AAA rated categories as the risk weight for these higher rated categories would range between 50 and 20 per cent.
For AAA rated borrowers this would mean capital saving of 80 per cent for the bank. The ratings could also be used to decide the terms of the loans.
