Investment Risk Grading / ICRRS – Internal Credit Risk Rating System
📌 Last Updated: March 2026 — This post has been fully updated to reflect the latest Bangladesh Bank circulars including BRPD Circular No. 16/2018, BRPD Circular No. 12/2019, and subsequent amendments up to BRPD Circular Letter No. 02/2024 and BB's August 2025 relaxation directive. The old CRG/IRG system has been officially replaced.
Background: From CRG to ICRRS
Investment Risk Grading (IRG) was an earlier informal term used for assessing credit risk. It evolved into the formal Credit Risk Grading (CRG) system introduced in 2005 — a single-template model applied uniformly across all sectors. Recognising its limitations — especially its inability to capture sector-specific risk characteristics — Bangladesh Bank replaced CRG with the Internal Credit Risk Rating System (ICRRS).
BRPD Circular No. 16/2018 issued on 30 October 2018 introduced the ICRRS Guidelines. Banks were directed to implement ICRRS by 1 October 2019 (extended from the original July 2019 deadline by BRPD Circular No. 12/2019).
What is ICRRS?
ICRRS (Internal Credit Risk Rating System) is a fully automated, Excel-based credit risk scoring tool designed to assess a borrower's repayment capacity based on financial condition, industry/business characteristics, management quality, compliance behaviour, and relationship profile.
Unlike the old CRG (one template for all), ICRRS uses 20 different rating templates for 20 industries/sectors under four broad categories:
- A. Industry / Manufacturing
- B. Trade and Commerce
- C. Service
- D. Agro-based and Agro Processing
Applicability of ICRRS
ICRRS is applicable for all exposures (irrespective of amount), except the following:
| Exempted Category | Threshold / Remarks |
|---|---|
| Consumer Loans | All consumer loans exempted |
| Small Enterprises (General) | Total loan exposure < BDT 50 lac |
| Small Enterprises (Manufacturing) | Total loan exposure < BDT 1 crore |
| Short-Term Agricultural Loans | Fully exempted |
| Micro-Credit | Fully exempted |
| Lending to Banks, NBFIs & Insurance Cos. | Fully exempted |
| Micro Finance Institutions, Merchant Banks, Stock Brokers, NGOs | Exempted by subsequent BB circular (2021); banks to use their own risk tools |
All credit proposals — whether New, Renewal, or Enhancement — must go through the ICRR process.
Score Structure: Quantitative vs Qualitative
| Component | Weight | Who Performs |
|---|---|---|
| Quantitative Indicators | 60% | Credit Officer / Analyst |
| Qualitative Indicators | 40% | Relationship Manager / Branch Manager |
Note: Previously under CRG, the split was 50%-50%. ICRRS gives more weight to financial data (quantitative).
Quantitative Indicators (60% Total)
| # | Category | Weight |
|---|---|---|
| 1 | Leverage | 10% |
| 2 | Liquidity | 10% |
| 3 | Profitability | 10% |
| 4 | Coverage | 15% |
| 5 | Operational Efficiency | 10% |
| 6 | Earning Quality | 5% |
| Total (Quantitative) | 60% | |
Qualitative Indicators (40% Total)
| # | Category | Weight |
|---|---|---|
| 1 | Performance Behaviour | 10% |
| 2 | Business and Industry Risk | 7% |
| 3 | Management Risk | 7% |
| 4 | Security Risk | 11% |
| 5 | Relationship Risk | 3% |
| 6 | Compliance Risk | 2% |
| Total (Qualitative) | 40% | |
ICRR Rating Scale (Original Guidelines — 2018/2019)
| Rating | Aggregate Score | Colour Code | Action |
|---|---|---|---|
| Excellent | ≥ 80% | 🟢 Green | Lend freely |
| Good | ≥ 70% to < 80% | 🔵 Blue | Lend freely |
| Marginal | ≥ 60% to < 70% | 🟡 Yellow | Caution; evaluate before lending/renewing |
| Unacceptable | < 60% | 🔴 Red | No loan (exceptions: cash covered, Govt. guarantee, MDB guarantee, SOE) |
⚠️ IMPORTANT UPDATE — Threshold Revisions (Post-2021 Relaxations):
Bangladesh Bank revised ICRR thresholds multiple times due to pandemic and economic stress:
Bangladesh Bank revised ICRR thresholds multiple times due to pandemic and economic stress:
- BRPD Circular Letter No. 14/2021 — Scale revised: Excellent ≥80% → ≥75%; Good ≥70% → ≥65%; Marginal ≥60% → ≥55%; Unacceptable <60% → <55%
- BRPD Circular No. 07/2022 — Marginal further lowered: ≥55% → ≥50%; Unacceptable: <55% → <50% (Excellent & Good unchanged)
- BRPD Circular Letter No. 02/2024 — Effective January 2024. Marginal tightened: ≥50% → ≥55%; Unacceptable: <50% → <55%. Current scale:
Excellent ≥75% | Good ≥65% to <75% | Marginal ≥55% to <65% | Unacceptable <55% - 19 August 2025 (BRPD Circular) — Bangladesh Bank relaxed ICRRS, allowing banks to approve/renew/adjust loans even for "Unacceptable" borrowers under strict conditions: enhanced due diligence, proper collateral assessment, strengthened monitoring, and board compliance required before disbursement. A separate quarterly list of such loans must be sent to the second division of BRPD and maintained for inspection/audit purposes.
Revised ICRR Rating Scale (Current — per BRPD Circular Letter No. 02/2024, effective January 2024)
| Rating | Aggregate Score | Colour Code |
|---|---|---|
| Excellent | ≥ 75% | 🟢 Green |
| Good | ≥ 65% to < 75% | 🔵 Blue |
| Marginal | ≥ 55% to < 65% | 🟡 Yellow |
| Unacceptable | < 55% | 🔴 Red |
Key Rules and Management Action Triggers
- Excellent / Good: Loans can be sanctioned freely.
- Marginal: Bank must take cautionary measures; justify carefully before lending or renewing.
- Unacceptable: No loan shall be sanctioned unless —
- Loan is 100% cash covered, OR
- Fully guaranteed by the Government, OR
- Fully guaranteed by Multilateral Development Banks (MDBs), OR
- Loan is for a State-Owned Enterprise (SOE) / state-owned project
- Banks may renew/enhance existing loans for maximum 2 (two) times even if ICRR is "Unacceptable".
- If the quantitative score is less than 40% (per Version 2.0 update), the ICRR shall be "Unacceptable" regardless of qualitative score.
- If ICRR falls "Marginal" or "Unacceptable" for any individual risk criterion (among 16 quantitative and 18–20 qualitative), the Relationship Manager must justify risk mitigation in the loan proposal.
- For newly established companies with no meaningful financial history, rating may be based on projected financial statements.
- For proprietorship / partnership concerns where audited accounts are not mandatory, unaudited statements may be used with due diligence.
Frequency of ICRRS Assessment
ICRRS must be conducted at the time of:
- New loan sanctions
- Renewal of existing credit facilities
- Enhancement of credit limits
The ICRRS report must be retained in the loan file.
Capital Adequacy Context (Basel III)
Under the Basel III framework, a borrower with the worst ICRR performance carries a risk weight of 150% for capital adequacy purposes. Banks must maintain a minimum Capital to Risk-weighted Asset Ratio (CRAR) of 10% under Basel III.
⚠️ Bangladesh Banking Sector — Capital Crisis 2024-25:
As of end-2024, the banking sector's CRAR dropped sharply to 3.08% — far below the 10% Basel III minimum. 19 banks (including 6 state-owned) face a combined capital shortfall of approximately BDT 1,71,700 crore. Non-performing loans surged to BDT 3,45,765 crore. Private commercial banks remain healthier with CRAR of ~10.98% while foreign banks stand at 42.09%.
As of end-2024, the banking sector's CRAR dropped sharply to 3.08% — far below the 10% Basel III minimum. 19 banks (including 6 state-owned) face a combined capital shortfall of approximately BDT 1,71,700 crore. Non-performing loans surged to BDT 3,45,765 crore. Private commercial banks remain healthier with CRAR of ~10.98% while foreign banks stand at 42.09%.
CRG vs ICRRS — Quick Comparison
| Feature | Old CRG (2005) | New ICRRS (2018–Present) |
|---|---|---|
| Introduced | 2005 | BRPD Circular No. 16, October 2018 |
| Templates | 1 (for all sectors) | 20 (sector-specific) |
| Quantitative Weight | 50% | 60% |
| Qualitative Weight | 50% | 40% |
| Rating Categories | Multiple (varied) | 4: Excellent, Good, Marginal, Unacceptable |
| Automation | Manual/semi-automated | Fully automated (Excel-based) |
| Sector Differentiation | No | Yes (18–20 industries under 4 sectors) |
| Status | Superseded / Abolished | Currently in force (with amendments) |
ICRR Score Scale — Full Evolution at a Glance
| Rating | Original 2018/19 (BRPD No.16/2018) | After 2021 (BRPD CL No.14/2021) | After 2022 (BRPD No.07/2022) | Current (Jan 2024) (BRPD CL No.02/2024) |
|---|---|---|---|---|
| Excellent | ≥ 80% | ≥ 75% | ≥ 75% | ≥ 75% |
| Good | ≥ 70% to <80% | ≥ 65% to <75% | ≥ 65% to <75% | ≥ 65% to <75% |
| Marginal | ≥ 60% to <70% | ≥ 55% to <65% | ≥ 50% to <65% | ≥ 55% to <65% |
| Unacceptable | < 60% | < 55% | < 50% | < 55% |
📋 Quick Revision Summary Table with Mnemonic
| Item | Key Fact |
|---|---|
| Governing Circular | BRPD Circular No. 16, 30 Oct 2018 |
| Effective Date | 1 October 2019 (BRPD Circular No. 12/2019) |
| Replaces | CRG (Credit Risk Grading) of 2005 |
| No. of Templates | 20 (sector-specific) |
| Sectors Covered | Industry, Trade & Commerce, Service, Agro-based (4 sectors) |
| Quantitative Weight | 60% |
| Qualitative Weight | 40% |
| Quantitative Sub-Criteria | 6: Leverage, Liquidity, Profitability, Coverage, Operational Efficiency, Earning Quality |
| Qualitative Sub-Criteria | 6: Performance Behaviour, Business/Industry Risk, Management Risk, Security Risk, Relationship Risk, Compliance Risk |
| Original Excellent Score | ≥ 80% |
| Current Excellent Score (post-2024) | ≥ 75% |
| Current Marginal Score (post-2024) | ≥ 55% to < 65% |
| Current Unacceptable Score (post-2024) | < 55% |
| Renewal despite Unacceptable | Max 2 times |
| Risk Weight (worst performer) | 150% (Basel III) |
| Quantitative score trigger for auto-Unacceptable | < 40% in quantitative part |
| 19 Aug 2025 Update | BB relaxed ICRRS — "Unacceptable" borrowers may now access credit under strict conditions (enhanced due diligence, collateral assessment, board compliance, quarterly report to BRPD) |
🧠 Mnemonic to Remember the 6 Quantitative Indicators: "LL PC OE"
Leverage · Liquidity · Profitability · Coverage · Operational Efficiency · Earning Quality
Story: "A LL.B lawyer runs a PC repair shop with excellent Operational Efficiency and solid Earning Quality" — LL-PC-OE
🧠 Mnemonic for Qualitative Indicators: "PB BM SCR"
Performance Behaviour · Business & Industry Risk · Management Risk · Security Risk · Compliance Risk · Relationship Risk
Story: "A PB (Private Banker) sees BM (Branch Manager) worry about SCR (Security-Compliance-Relationship)"
🧠 Score Scale Memory — "75-65-50-X" (Current after 2024 revision):
Excellent ≥75 | Good ≥65 | Marginal ≥55 | Unacceptable <55
"75 Gold, 65 Good, 55 Shaky, Below 55 — No Way!"
Leverage · Liquidity · Profitability · Coverage · Operational Efficiency · Earning Quality
Story: "A LL.B lawyer runs a PC repair shop with excellent Operational Efficiency and solid Earning Quality" — LL-PC-OE
🧠 Mnemonic for Qualitative Indicators: "PB BM SCR"
Performance Behaviour · Business & Industry Risk · Management Risk · Security Risk · Compliance Risk · Relationship Risk
Story: "A PB (Private Banker) sees BM (Branch Manager) worry about SCR (Security-Compliance-Relationship)"
🧠 Score Scale Memory — "75-65-50-X" (Current after 2024 revision):
Excellent ≥75 | Good ≥65 | Marginal ≥55 | Unacceptable <55
"75 Gold, 65 Good, 55 Shaky, Below 55 — No Way!"
Frequently Asked Questions (Exam-Ready)
| Question | Answer |
|---|---|
| What does ICRRS stand for? | Internal Credit Risk Rating System |
| Which circular introduced ICRRS? | BRPD Circular No. 16, dated 30 October 2018 |
| When was ICRRS made mandatory? | 1 October 2019 |
| What did ICRRS replace? | Credit Risk Grading (CRG) system of 2005 |
| How many templates does ICRRS have? | 20 templates for 20 industry/sectors |
| What are the 4 sectors of ICRRS? | Industry, Trade & Commerce, Service, Agro-based & Agro Processing |
| What is the quantitative weight in ICRRS? | 60% |
| Can a bank lend to a "Marginal" borrower? | Yes, but with caution and strong justification |
| Can a bank lend to an "Unacceptable" borrower? | Only if 100% cash covered, or Govt./MDB guaranteed, or SOE/state project |
| How many times can an "Unacceptable" borrower renew? | Maximum 2 times |
| What is the risk weight for the worst ICRR performer? | 150% (under Basel III) |
| Who fills the qualitative part of ICRRS? | Relationship Manager / Branch Manager |
| What if quantitative score is less than 40%? | ICRR shall automatically be "Unacceptable" |
| What is the current CRAR of Bangladesh's banking sector? | 3.08% (end of 2024) — below 10% Basel III minimum |
| What did BB do on 19 August 2025 regarding ICRRS? | Relaxed ICRRS rules — "Unacceptable" borrowers may now access credit under strict conditions: enhanced due diligence, collateral assessment, board compliance, and quarterly report to BRPD's 2nd Division |
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