Asset quality and bank loan ratings
The surveillance rating of loans, if done well, should pick up signals and reflect in the revised ratings
The high level of non-performing loans (NPLs) in banking is the most important issue facing the Indian economy currently. One aspect of the NPL issue that has escaped attention is the role played by bank loan ratings. Indian banks extensively use ratings provided by external (rating) agencies as a part of the loan sanctioning and monitoring process. Any assessment of risk management in banks will be incomplete if we do not critically evaluate the role of these loan ratings.