Thursday, May 18, 2017

Partial Credit Enhancement to Corporate Bonds

 On a review of the capital requirement for PCE, it has been decided that:

a)                           To be eligible for PCE from banks, corporate bonds shall be rated by a minimum of two external credit rating agencies at all times;

b)                             The rating reports shall disclose both standalone credit rating ( pre- PCE) as well as the enhanced credit rating (post- PCE).

c)                          For the purpose of capital computation in the books of PCE provider, lower of the two ratings shall be reckoned.

d)                          Where the reassessed standalone credit rating shows improvement over the rating at the time of bond issuance, the capital requirement may be recalculated on the basis of the reassessed standalone credit rating and the reassessed enhanced credit rating, without reference to the constraints of capital floor and difference in notches.
Based on RBI circular dated 18/05/2017. For any further clarification if required, Please refer