Introduction Loan restructuring, rehabilitation, and recovery are critical components of credit risk management within the banking and financial services sector. These processes aim to support borrowers experiencing financial distress, preserve the economic value of assets, and ensure the stability of the financial system. This article provides an in-depth overview of the mechanisms and regulatory frameworks…
Introduction Credit ratings play a pivotal role in the effective assessment and management of credit risk within the financial system. These ratings may originate from external independent agencies or be internally developed by financial institutions. While both internal and external ratings serve the purpose of evaluating creditworthiness, they differ significantly in terms of their source,…
President Mr.Ram Nath Kovind on Wednesday (June 6, 2018) gave assent to promulgate the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018. The Government in its statement said that the changes envisioned in the amendment are expected to further strengthen the Insolvency Resolution Framework in the country and produce better outcomes in terms of resolution as…
Rating symbols may vary depending on the type of debt instrument and the tenure i.e. long-term or short-term. Each rating symbol is an alpha-numeric representation of the degree of repayment risk associated with debt instruments. The following image gives you an idea about the symbols given by the CRAs. Credit rating agencies employ unique terminologies…
IntroductionThe Reserve Bank of India (RBI) has issued comprehensive guidelines on credit risk management with a specific emphasis on the development and utilization of Credit Information Systems. These guidelines are intended to strengthen the credit appraisal and monitoring mechanisms of financial institutions, reduce the incidence of Non-Performing Assets (NPAs), and promote a prudent and resilient…
The National Company Law Tribunal (NCLT) is the adjudicating authority (quasi-judicial authority) for the insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code, 2016. Previously, there were four different legal forums viz. High Courts, Company Law Boards, Board for Industrial and Financial Reconstruction (BIFR), and Debt Recovery Tribunal (DRT)…
IntroductionCredit risk, also referred to as default risk, represents the potential for financial loss resulting from a borrower’s failure to repay a loan or meet contractual debt obligations. It is a critical concern for financial institutions, investors, and other lenders, who must evaluate and manage this risk to protect their capital and ensure financial stability.…
IntroductionCredit risk management and credit rating are interrelated components of a sound lending framework, enabling financial institutions to evaluate and mitigate the risk of borrower default. While credit risk management encompasses internal strategies and procedures aimed at minimizing losses from defaults, credit ratings—typically assigned by external agencies—provide an independent evaluation of a borrower’s creditworthiness. Together,…
(This post elucidates details of timelines for implementation of Resolution Plan (RP) and insolvency application to be filed by the lenders if a RP is not implemented as per the timeline.) In terms of RBI circular dated February 12, 2018, the ‘Resolution Plans’ (RP) under IBC shall be implemented within the timeline given below in…
The Reserve Bank of India (RBI), as the central monetary authority of the country, employs credit control as a critical tool of monetary policy to regulate the availability, cost, and direction of credit in the economy. The objective is to achieve key macroeconomic goals such as price stability, sustainable economic growth, and overall financial stability.…
