We are confronted with a situation where it is likely that only about 10% of banks’ corporate exposures are rated by these external rating agencies. One might, therefore conclude that the banks in India would be effectively applying the Basel I risk-weight (viz. 100 per cent) for most of their corporate exposures even after adopting Basel II.
This may be seen as a major disincentive for banks to migrate to Basel II. Our interactions with the domestic rating agencies indicate that they are equipped to scale their resources, in case of need, to cater to a higher demand for ratings consequent upon implementation of Basel II. At present, the ratings in India are issue specific and not issuer specific.