Question

    For existing ratings on working capital facilities

    exceeding ₹250 crore, how long can the CRA undertake rating surveillance? Read the following passage and answer the following question (Q20 to Q21). The Reserve Bank of India (RBI), as part of its Basel III Capital Regulations, has allowed banks to use external credit ratings to assess their risk-weighted assets for capital adequacy purposes. However, restrictions apply to certain credit rating agencies, particularly in terms of new rating mandates and existing loans. For instance, there are specific limits on loan amounts for which fresh ratings can be obtained, and conditions governing the surveillance of existing ratings, particularly for larger working capital facilities. These regulatory changes aim to ensure that banks are using reliable and appropriate credit ratings to manage their capital adequacy in a risk-sensitive manner.
    A Until the loan reaches maturity Correct Answer Incorrect Answer
    B Until the next fiscal year Correct Answer Incorrect Answer
    C Until the next renewal of the working capital facility Correct Answer Incorrect Answer
    D Until the principal is repaid Correct Answer Incorrect Answer
    E For the entire duration of the loan's tenure Correct Answer Incorrect Answer

    Solution

    For existing ratings on working capital facilities exceeding ₹250 crore, the CRA can undertake rating surveillance only until the next renewal of the facility by the banks, as per the updated RBI guidelines.

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