Reserve Bank of India amends small finance bank capital adequacy rules to revise risk weights for non-resident corporate exposures and recognise CareEdge Global IFSC ratings

The Reserve Bank of India issued amendments to its capital adequacy directions for small finance banks, updating how banks must risk weight claims on non-resident corporates based on ratings from specified international credit rating agencies. The changes introduce a dedicated risk weight mapping for claims originating at an International Financial Services Centre (IFSC) where ratings are assigned by CareEdge Global IFSC Limited, and update the list of eligible rating agencies for risk-weighting purposes. Under the revised framework, risk weights for non-resident corporate exposures rated by Standard & Poor’s, Fitch and Moody’s map to 20 percent (AAA to AA or Aaa to Aa), 50 percent (A), 100 percent (BBB to BB or Baa to Ba), 150 percent (below BB or below Ba) and 100 percent (unrated). For IFSC-originated claims rated by CareEdge Global IFSC Limited, the mapping is 20 percent (AAA), 30 percent (AA), 50 percent (A), 100 percent (BBB) and 150 percent (BB and below). Additional conditions apply to unrated claims, including a 150 percent risk weight where aggregate exposure from the banking system exceeds INR 200 crore, and a 150 percent risk weight for exposures above INR 100 crore that were previously rated but subsequently became unrated, while unrated corporate claims cannot receive a risk weight lower than that assigned to the sovereign of incorporation. The amendments take effect immediately.