Nabard said in its communication that the design of risk management framework should be based on their own requirements, size and complexity of business, risk philosophy and market perception for the long-term success.
Nabard advised banks to formulate a flexible grading system to enable comparisons of risks for purposes of analysis decision-making. It should also reflect regulatory requirements of the supervisor on asset classification and accommodate the refinements in risk categorisation.
In a statement Nabard said: “In a bank’s portfolio, losses stem from outright default due to inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, settlement and other financial transactions. Alternatively, losses result from reduction in portfolio value arising from actual or perceived deterioration in credit quality,” reported the newspaper.
Nabard facilitates credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas in India.
