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The ratings will provide a uniform benchmark for credit and pricing decisions in the bank loan market, focusing on both the risk of default, and the likelihood of ultimate recovery in the event of default.

Mumbai , July 18

CRISIL has launched bank loan ratings.

While this is the first such initiative in the country, bank loan ratings are widely accepted and extensively used globally. Standard and Poor's rates some 1,350 company loans aggregating $982 billion. Crisil has termed it an initiative to serve the interests of debt market participants.

The ratings can be at the behest of the borrower or the lender. The rating could lead to the eventual offtake of bank credit. The rating could strengthen the banks' confidence in their borrowers.

In addition to commenting on the timely payment of principal and interest, the rating will give an opinion on the extent of recoverability of the loan post-default, by capturing the impact of covenants, security and other repayment protection provided specifically to lenders.

Mr R. Ravimohan, Managing Director and CEO, Crisil, said, "We expect the bank loan ratings to provide a uniform benchmark for credit and pricing decisions in the bank loan market. Loan ratings focus on both the risk of default, and the likelihood of ultimate recovery in the event of default."

The assessment of recovery prior to loan sanction will be another effort in the ongoing push for a rigorous assessment of loan recoveries. On the one hand is sharpened focus on non-performing loans by banks, just as the legal framework has been strengthened by way of enactments such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act.

According to Ms Roopa Kudva, Executive Director and Chief Rating Officer, Crisil, the ratings will support Indian banks in the implementation of the Basel II Accord, by providing an independent opinion on loan-specific risk. "This can be used by banks for risk pricing, capital allocation and portfolio management," she said.

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