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      Question

      If external rating of a borrower is changes from A to

      BBB, how does risk weight change under Basel norms?
      A Decrease Correct Answer Incorrect Answer
      B Increase Correct Answer Incorrect Answer
      C No change Correct Answer Incorrect Answer
      D Doubles Correct Answer Incorrect Answer
      E Becomes zero Correct Answer Incorrect Answer

      Solution

      Lower rating means higher credit risk; thus, risk weight increases as per Basel norms.

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