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RBI Circular No: RBI/2016-17/305 (18-May-17) Partial Credit Enhancement to Corporate Bonds

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DBR.No.BP.BC.70/21.04.142/2016-17

All Scheduled Commercial Banks

(Excluding Regional Rural Banks)

Madam/Dear Sir,

Please refer to paragraph 21 (a) of the Guidelines on Partial Credit Enhancement to Corporate Bonds by Banks annexed to the circular DBR.BP.BC.No.40/21.04.142/2015-16 dated September 24, 2015, on the capital requirements during the lifetime of the bond in respect of which partial credit enhancement (PCE) is provided by the banks.

2. 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, both initial and subsequent, shall disclose both standalone credit rating (i.e., rating without taking into account the effect of PCE) as well as the enhanced credit rating (taking into account the effect of PCE).

c) For the purpose of capital computation in the books of PCE provider, lower of the two standalone credit ratings and the corresponding enhanced credit rating of the same rating agency shall be reckoned.

d) Where the reassessed standalone credit rating at any time during the life...

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