Rural Bank 1. Objectives
The provisions concerning bank rat ing are int ended f or use as:
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a benchmark f or bank management in assessing w het her t he bank is managed according t o sound
b an k i n g p r i n ci p l es an d i n co m p l i an ce w i t h prevailing regulations.
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a benchmark f or det ermining t he course of bank supervision on bot h an individual basis and f or t he
banking syst em as a w hole.
2. Rating System
In essence, rat ing of banks t akes place t hrough a qualit at ive assessment of t he various aspect s aff ect ing
t he condit ion and grow t h of a bank, covering Capit al, Asset s Qualit y, M anagement , Earnings, and Liquidit y
CAM EL. Important aspects of the rating are described as f ollow s:
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The out come of t he rat ing is expressed as one of four levels: Sound, Fairly Sound, Poor, and Unsound.
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Th e w ei g h t i n g o f each CA M EL f act o r f o r Commercial Banks and Rural Banks is as f ollow s:
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Enf orcem ent of regulat ory provisions in w hich sanct ions are linked t o Com m ercial Bank rat ing
apply t o violat ion andor lending in excess of t he Legal Lending Limit violation of applying know your
cust omer KYC principle, violat ion of t ransparency in b an k p ro d u ct in f o rm at io n an d u se o f t h e
cust omer personal dat a
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Fact ors t hat w ould result in dow ngrading of bank rat in g t o u n so u n d in clu d e: in t ern al co n f lict s,
i n t er f eren ce b y p ar t i es o u t si d e t h e b an k ’s management , w indow dressing, bank-w it hin-bank
pract ices, suspension f rom clearing, and ot her b an k in g p ract ices t h at w o u ld jeo p ard ize t h e
sust ainabilit y of bank operat ions.
E. Self-Regulatory Banking SRB Regulations
1. Guidelines for Formulation of Bank Credit Policy
Banks are required t o inst it ut e w rit t en credit policy guidelines elaborating at least the follow ing key points
st ipulat ed in t he Guidelines f or Formulat ion of Bank Credit Policy:
a. Prudent ial principles in credit operat ions. b. Organization and management of credit operations.
c. Credit approval policy. d. Credit document at ion and administ rat ion.
e. Credit cont rol and set t lement of problem loans. Banks are required t o maint ain consist ent compliance
w it h t he f ormulat ed Guidelines on Bank Credit Policy.
2. Internal Audit Unit at Commercial Banks
