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Shashi Ashiwal

Strategic move: Mr P.L. Gairola (right), CMD, Dena Bank, and Mr K. Sivaprakasam, MD, CARE, at a press conference in Mumbai on Monday. -

Our Bureau

Mumbai, Aug. 6 Dena Bank has signed a Memorandum of Understanding with the credit rating agencies CARE and Crisil for evaluating credit quality of its existing and potential corporate clients.

The bank will make use of the credit ratings of the agencies in respect of its corporate infrastructure exposure, manufacturing companies and small and medium enterprises including small-scale industries.

The credit ratings will also help the bank in its Basel II preparations and will form part of its core strategies for efficient allocation of capital.

The bank will, however, also continue with its internal rating system.

“The higher the rating of the borrower, the lower will be the risk weightage,” said Mr P L Gairola, Chairman and Managing Director, Dena Bank.

The new guidelines on capital adequacy issued by the Reserve Bank of India require banks to link the minimum size of their capital to the credit risk in their portfolios while banks currently calculate the minimum size of their capital as a proportion of the entire loan portfolio, regardless of the degree of credit risk.

The credit rating will bring uniformity in pricing and approach. The rating agencies charge about 0.1 per cent of the amount rated.

The rating will also ensure allocating capital as per risk.

More Stories on : Credit Market | Public Sector Banks | Credit Rating

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