Investment Risk Grading

Investment Risk Grading is a vital factor before taking any investment decision. For lack of weaker risk grading, an investment decision may turn into a bad one. IRG now ICRR as per “  GUIDELINES ON INTERNAL CREDIT RISK RATING SYSTEM FOR BANKS”

The ICRRS shall be applicable for all exposures (irrespective of amount) except consumer loans, small enterprises having total loans exposures less than BDT 50 (fifty) lac and small enterprises in manufacturing having total loans exposures less than BDT 1 (one) crore, short-term agri loans, micro-credit and lending to bank, NBFI and Insurance.

Score:  Internal Credit Risk Rating Scores

4-notched rating system covering the Quantitative and Qualitative parameters.	Scores Aggregate
Excellent	≥80%
Good	≥70% to <80%
Marginal	≥60% to <70%
Unacceptable	<60%

Quantitative indicators in ICRR fall into six broad categories: leverage, liquidity, profitability, coverage, operational efficiency, and earning quality. For detail see: PDF table page :10-11

1. Leverage (10%)

2. Liquidity (10%)

3. Profitability (10%)

4. Coverage (15%)

5. Operational Efficiency (10%)

6. Earning Quality (5%)

Qualitative indicators cover six broad aspects of the firms/institutions to be rated, namely business/industry risk, credit quality enhancement, performance behavior, management risk, relationship risk, and compliance risk. Noteworthy that aggregate weights against the qualitative indicators stands at 40 percent.

                    1.  Performance Behavior 10 %

2                  2.  Business and Industry Risk 7%

3. Management Risk  7%

        4. Security Risk 11%

5. Relationship Risk 3 %

6. Compliance Risk 2%

36. The client having worst performance would have risk weight-----150%