RBI Circular Summary: CareEdge Global IFSC Ltd Approved as ECAI under Basel III

RBI Circular Summary: Basel III Capital Regulations - Recognition of CareEdge Global IFSC Limited as ECAI

1. Circular Snapshot

Title of Circular	Basel III Capital Regulations – External Credit Assessment Institutions (ECAIs) – CareEdge Global IFSC Limited
Issuing Authority	Reserve Bank of India – Department of Regulation
Date of Issue	10 July 2025
Effective From	Immediate
Target Audience	All Scheduled Commercial Banks (incl. Small Finance Banks) excluding LABs, Payments Banks, RRBs
Related Exam Topics	CAIIB | Basel III | Capital Adequacy | Risk Weight Mapping | ECAI Ratings

2. Context & Background

Under Basel III norms, banks are required to assign risk weights to their exposures based on external credit ratings to compute capital adequacy. Previously, only three international rating agencies—Fitch, Moody’s, and Standard & Poor’s—were permitted for assigning ratings to foreign exposures. However, with increasing participation of Indian entities in the International Financial Services Centre (IFSC), the Reserve Bank of India has now expanded the eligible list of External Credit Assessment Institutions (ECAIs) by including CareEdge Global IFSC Limited. This move enhances accessibility to ratings for non-resident corporates originating from IFSC.

3. Key Highlights / Action Points

For Scheduled Commercial Banks (incl. Small Finance Banks):

• Banks can now use CareEdge Global IFSC Limited ratings for risk-weighting claims on non-resident corporates from IFSC.
• This is in addition to existing approved ECAIs: Fitch, Moody’s, S&P.
• Applicable for Basel III capital adequacy calculations only.

Rating to Risk Weight Mapping:

Rating Category	AAA	AA	A	BBB	BB & below
Risk Weight (%)	20	30	50	100	150

4. Exam Relevance & Application-Based Notes

• Exam Bodies Impacted: IIBF CAIIB, NISM Capital Market Module
• Concept: Basel III, External Credit Assessment Institutions, Risk Weight Mapping
• Sample MCQ:
  Sample MCQ 1: “Which of the following credit rating agencies has been newly approved by RBI for risk-weighting of foreign exposures under Basel III?”
  a) CRISIL
  b) CareEdge Global IFSC Ltd
  c) Brickwork
  d) India Ratings
  
  Sample MCQ 2: “A bank is assessing the capital adequacy requirements for its exposure to a non-resident corporate entity rated by CareEdge Global IFSC Limited under Basel III guidelines. If the corporate holds an 'A' rating, and the exposure is ₹50 crore, what is the risk-weighted exposure value to be considered for capital computation?”
  a) ₹10 crore
  b) ₹15 crore
  c) ₹25 crore
  d) ₹50 crore

5. Full Circular Reference

View Official Circular PDF - Basel III Capital Regulations – External Credit Assessment Institutions (ECAIs) – CareEdge Global IFSC Limited

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6. Summary Snapshot (To share on WhatsApp)

• Title: RBI Approves CareEdge Global IFSC Ltd as ECAI
• Purpose: Expand eligible ECAIs under Basel III for foreign exposures
• Key Points:
  • CareEdge Global IFSC Ltd added as recognized ECAI
  • Applicable for non-resident corporates from IFSC
  • New risk-weight mapping introduced
  • A GurukulOnRoad Learning Initiative

7. FAQs - Frequently Asked Questions

+ What is the main update in this RBI circular?

RBI has permitted banks to use ratings from CareEdge Global IFSC Limited for capital adequacy calculation under Basel III.

+ Which types of banks does this apply to?

All Scheduled Commercial Banks including Small Finance Banks, except Local Area Banks, Payments Banks, and Regional Rural Banks.

+ What type of exposures does this apply to?

It applies to claims on non-resident corporates originating at the International Financial Services Centre (IFSC).

+ What are the defined risk weights for CareEdge Global ratings?

AAA – 20%, AA – 30%, A – 50%, BBB – 100%, BB & below – 150%.

+ Is CareEdge Global IFSC Ltd a replacement for Fitch, Moody’s, and S&P?

No, it is an addition. Banks can now use any of the four approved ECAIs for relevant exposures.

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