Prudential Guidelines on Capital Adequacy and Market Discipline – New Capital Adequacy Framework (NCAF) -Revision of Rating Symbols and Definitions of Credit Rating Agencies

The Chairman / CMD / MD / CEO

All Scheduled Commercial Banks
(excluding LABs and RRBs)

Dear Sir,

Prudential Guidelines on Capital Adequacy and Market Discipline – New Capital Adequacy Framework (NCAF) –Revision of Rating Symbols and Definitions of Credit Rating Agencies

Please refer to the Master Circular No. DBOD.No.BP.BC.11/21.06.001/2011-12 dated July 1, 2011 on ‘Prudential Guidelines on Capital Adequacy and Market Discipline – New Capital Adequacy Framework (NCAF)’ by which the consolidated prudential guidelines had been issued to banks on the captioned subject.

2. In terms of para 6 of the circular, four domestic credit rating agencies viz. CARE, CRISIL, FITCH India and ICRA have been accredited for the purpose of risk weighting the banks’ claims for capital adequacy purposes. The long term and short term ratings issued by the chosen domestic credit rating agencies have been mapped to the appropriate risk weights applicable as per the Standardised Approach under the Basel II Framework.

3. SEBI has, vide its circular CIR/MIRSD/4/2011 dated June 15, 2011 on ‘Standardisation of Rating Symbols and Definitions’, instructed Credit Rating Agencies (CRAs) registered with SEBI to adopt common rating symbols and rating definitions, whichshall henceforth be used for the new ratings / reviews by the CRAs. Under the revised standardized system, there is no change in the long term rating symbols except that rating symbols will henceforth display the rating agency’s name as a prefix. In case of short term ratings, a rating scale denoted by ‘A’ on a scale of ‘1’ to ‘4’ (i.e. A1, A2, A3 and A4) and ‘D’ has been prescribed. The four accredited CRAs, which are registered with SEBI, have therefore revised their rating symbols of long term and short term debt instruments. The new rating symbols of the chosen CRAs vis-à-vis their old rating symbols for long term and short term instruments are furnished in Annex for ready reference.

4. The aforesaid change in rating symbols and definitions however does not effect, in any manner, the rating methodology followed by the CRAs for rating such instruments and will have no bearing on the existing ratings assigned by the CRAs under the Basel-II framework.

5. In view of above, banks are advised that they should henceforth use the revised rating symbols of the credit rating agencies with the corresponding guidance in the master circular under reference for the purpose of assigning risk weights to the various exposures.

6. All other provisions regarding external credit ratings of the master circular remain unchanged.

Yours faithfully,

(Deepak Singhal)
Chief General Manager-in-charge


Annex

Revised Rating Symbols of CARE, CRISIL, FITCH and ICRA

CARE

Long-Term Debt instruments

Short-Term Debt instruments

Earlier Rating Symbol

Revised Rating Symbol

Existing Symbols

New Symbols

AAA

CARE AAA

PR-1

CARE A1

AA

CARE AA

PR-2

CARE A2

A

CARE A

PR-3

CARE A3

BBB

CARE BBB

PR-4

CARE A4

BB

CARE BB

PR-5

CARE D

B

CARE B

C

CARE C

D

CARE D

CRISIL

Long-Term Debt instruments

Long-Term Debt instruments

Revised Rating Symbol

Revised Rating Symbol

Earlier Rating Symbol

Revised Rating Symbol

AAA

CRISIL AAA

P1

CRISIL A1

AA

CRISIL AA

P2

CRISIL A2

A

CRISIL A

P3

CRISIL A3

BBB

CRISIL BBB

P4

CRISIL A4

BB

CRISIL BB

P5

CRISIL D

B

CRISIL B

C

CRISIL C

D

CRISIL D

FITCH INDIA

Long-Term Debt instruments

Short-Term Debt instruments

Earlier Rating Symbol

Revised Rating Symbol

Earlier Rating Symbol

Revised Rating Symbol

AAA (ind)

Fitch AAA

F1(ind)

Fitch A1

AA (ind)

Fitch AA

F2(ind)

Fitch A2

A (ind)

Fitch A

F3 (ind)

Fitch A3

BBB(ind)

Fitch BBB

F4(ind)

Fitch A4

BB(ind)

Fitch BB

F5(ind)

Fitch D

B(ind)

Fitch B

C(ind)

Fitch C

D

Fitch D

ICRA

Long-Term Debt instruments

Short-Term Debt instruments

Earlier Rating Symbol

Revised Rating Symbol

Earlier Rating Symbol

Revised Rating Symbol

LAAA

ICRA AAA

A1

ICRA A1

LAA

ICRA AA

A2

ICRA A2

LA

ICRA A

A3

ICRA A3

LBBB

ICRA BBB

A4

ICRA A4

LBB

ICRA BB

A5

ICRA D

LB

ICRA B

LC

ICRA C

LD

ICRA D

Note:

1. In case of Long Term Debt Instruments, modifiers {“+” (plus) / “-“(minus)} can be used with the rating symbols for the categories AA to C. The modifiers reflect the comparative standing within the category.

2. In case of Short Term Debt Instruments, modifier {“+” (plus)} can be used with the rating symbols for the categories A1 to A4. The modifier reflects the comparative standing within the category.

Therefore, PR1+/P1+/F1+(ind)/A1+ ratings of  CARE/CRISIL/FITCH/ICRA respectively as per the earlier rating symbol will now correspond to CARE/CRISIL/FITCH/ICRA  A1+, respectively, as per the revised rating symbols.

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