Please refer to BSD Circular No. 8 of 2006 which, inter alia, requires banks/ DFIs to assign risk weights to their on- and off-balance sheet exposures based on risk assessment made by the recognized external credit assessment institutions (ECAIs) for capital adequacy purposes.
It is advised that large private sector borrowers should be encouraged to get themselves rated since default of such entities may pose systemic risk. The independent opinion on the credit quality would provide better insight into the financial health of such borrowers, support bank’s internal credit risk assessment, may result in capital savings and lead to rationalized cost of borrowing for these entities.
In
view of above, it has been decided that effective from
December 31, 2014, all unrated private sector borrowers
with aggregate outstanding exposure from financial institutions
(both fund-based and non-fund based) of Rs. 3 billion
or above, net of liquid assets, will be subject to a risk
weight of 125%. Consequently, a new risk weight category
of unrated-2 specifying 125 percent risk weight is added
in serial No. k of table 2.2 of the BSD Circular No. 8
of 2006 as following:
Table 2.2 |
S. No. |
Exposure Type |
External rating |
Risk Weight |
k. |
Claim on Corporate (excluding equity exposures) |
1
2
3, 4
5, 6
Unrated-1
Unrated-2
|
20%
50%
100%
150%
100%
125%
|
All other instructions on the subject shall remain unchanged.
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