BANKING AFFAIRS

Detailed explanation-1: -Indian commercial banks are rated as per supervisory rating model approved by the BFS which is based on ‘ CAMELS ‘ concept.

Detailed explanation-2: -The CAMELS rating system assesses the strength of a bank through six categories. CAMELS is an acronym for capital adequacy, assets, management capability, earnings, liquidity, sensitivity. The rating system is on a scale of one to five, with one being the best rating and five being the worst rating.

Detailed explanation-3: -CAMELS is an international rating system used by regulatory banking authorities to rate financial institutions, according to the six factors represented by its acronym. The CAMELS acronym stands for “Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity."

Detailed explanation-4: -Rating 3. Represents performance that is flawed to some degree and is of supervisory concern. Risk management practices may be less than satisfactory relative to the bank’s or credit union’s size, complexity, and risk profile. Management may not identify nor provide mitigation of significant risks.

Detailed explanation-5: -More explicitly, the CAMELS rating system assesses how financial institutions manage their Capital, assets, management, earnings, liquidity as well as Sensitivity to contribute to overall performance.