(An Autonomous Apex Institute Established by RBI & Banks)
(An Autonomous Apex Institute Established by RBI & Banks)
Model risk is evaluated from the credit rating agency perspective and its implications on risk management practices to be adopted by Indian banks are elaborated upon. A sharp deterioration in the accuracy of agency ratings is observed from 2009 onwards in comparison to high accuracy values during 2004–08. Time series tests further reveal that a fall in the predictive power of agency rating leads to an increase in the incidents of corporate defaults in India. Banks need to follow due diligence in lending and reduce mechanistic reliance on external credit rating for evaluating corporate credit risk.
https://www.epw.in/journal/2024/18/insight/rating-accuracy-and-default-risk.html