February 04, 2019

Rating Process of All Banks

Rating of Indian and Foreign Banks:

On the recommendation of Padmanabhan Committee in November 1995.  Reserve Bank of India apply CAMELS for annual rating of Commercial Banks. According to this Committee every Indian Bank rated by CAMELS.  

There are following aspects which defines CAMELS- 

(1):C- Capital Adequacy Ratio. 

(2):A- Asset Quality (level of nonperforming assets). 

(3): M-Management Effectiveness.  

(4): E- Earning.

 (5): L- Liquidity. 

(6): Systems and Controls. 

Similarly Foreign banks rated by following five aspects (CALCS)

(1):C- Capital Adequacy. 

(2): A- Assets Quality.

 (3): L- Liquidity. 

(4): C- Compliance. 

(5): Systems and Controls. 

Symbols of Rating: there are five symbols of Rating (A,B,C,D and E)- 

A- Basically sound in every respect.

 B- Fundamentally sound but with moderate. 

C- Financial, Compliance or Operational weakness that give cause for Supervisory concern. 

D- Immoderate or serious finance, operational and managerial weakness that could impair future viability.

 E- Critical financial weakness that causes the possibility of failure high in the near term.             

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