RBI Removes Restrictions on Use of Brickwork Ratings for Capital Adequacy Calculations [Read Notification]

According to the notification, RBI allows Scheduled Commercial Banks including Small Finance Banks but excluding Local Area Banks, Payments Banks, and Regional Rural Banks to use BRIPL's ratings without any constraints when assigning risk weights to credit exposures. This is a key component of calculating regulatory capital requirements under the Basel III norms.

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The decision marks a departure from the earlier notification issued on July 10, 2024, which had only conditionally reinstated BRIPL’s ratings for use by banks. That notification had imposed specific limitations: fresh ratings from BRIPL could only be obtained for bank loans up to Rs. 250 crore, and surveillance of existing ratings was permitted only under certain conditions, such as for working capital facilities until their next renewal.

The 2024 notification had followed a period of regulatory caution. In an earlier Press Release dated October 12, 2022, the RBI had directed market participants not to obtain any fresh credit ratings from BRIPL, following concerns over governance and compliance at the rating agency.

Now, the RBI stated:

“On a review, it has been decided to remove the restrictions/limits placed on the use of ratings of BRIPL by the banks.”

The communication, signed by Chief General Manager Vaibhav Chaturvedi, also clarified that all other provisions related to external credit ratings, as laid out in the Master notification on Basel III Capital Regulations dated April 1, 2025, remain unchanged.

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Implications: This development is a major win for Brickwork Ratings, signaling a restoration of full regulatory confidence in the agency. It opens the door for broader utilization of its ratings across the banking sector, enhancing its competitive positioning among domestic credit rating agencies. For banks, the lifting of constraints simplifies compliance procedures and increases flexibility in credit assessment, particularly for capital adequacy purposes.

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