RBI Allows CareEdge IFSC Ratings for Basel III Risk Weighting
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- Last Updated on 14 July, 2025
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Circular No. RBI/2025-26/65 DOR.STR.REC.39/21.06.008/2025-26 Dated: 10.07.2025
The Reserve Bank of India (RBI) has allowed all Scheduled Commercial Banks—excluding Local Area Banks (LABs), Payments Banks, and Regional Rural Banks (RRBs)—to utilize the credit ratings of CareEdge Global IFSC Limited for the purpose of assigning risk weights to exposures on non-resident corporates originating from International Financial Services Centres (IFSCs).
1. Context – Alignment with Basel III Capital Regulations
This regulatory move is in line with the RBI’s efforts to align Indian banking regulations with the Basel III framework, which requires banks to assign capital based on the credit risk associated with their exposures. Previously, banks were allowed to rely only on international credit rating agencies—namely, Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s—for such risk weight calculations.
2. New Recognition – CareEdge Global IFSC Limited
With this change, CareEdge Global IFSC Limited becomes an eligible External Credit Assessment Institution (ECAI) for claims on non-resident corporates based in IFSCs. This recognition expands the pool of rating agencies, potentially offering banks more localised insights and diversified risk assessment options.
3. Risk Weights Based on CareEdge Ratings
Banks can now assign risk weights based on the ratings issued by CareEdge, as per the following indicative scale, consistent with existing norms:
- AAA – 20%
- AA – 30%
- A – 50%
- BBB – 100%
- BB & Below (or unrated) – 150%
These risk weights are used to compute capital adequacy ratios and determine the capital banks must hold against such exposures.
4. Implications for Banks and IFSC Ecosystem
This development is expected to:
- Enhance the ease of doing business for entities operating from IFSCs
- Provide greater flexibility to banks in credit risk assessment
- Strengthen India’s financial sector integration with global standards
- Encourage diversification in credit risk assessment practices
Click Here To Read The Full Circular
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