The Reserve Bank of India on Tuesday asked banks to prepare a roadmap by December 2004 for migrating to Basel-II norms and develop borrower assessment systems to align pricing of advances with credit risks.

The Basel Committee on Banking Supervision will be issuing the new Capital Accord (Basel II) by end-June 2004 which is expected to be implemented by the end of 2006.

• RBI Credit Policy: Complete Coverage

As preparation for such a transition, banks should examine in-depth the options available under Basel II and draw a road map by end-December 2004 for migration to Basel II, RBI said in its annual statement for 2004-05.

Banks should conduct a quarterly review of the progress made on adoption of Basel-II norms and the central bank would closely monitor the progress made by them on this front, it added.

On aligning the pricing of credit with risk profile of the borrowers, RBI said it is considered desirable that banks should align the pricing of credit to assessment of credit risk so that credit delivery and credit culture is improved.

Banks should put in place a comprehensive and rigorous system to assess borrower risk which could be done with help of the database available with them, as also other internal and external factors.

The risk profiling of borrowers was required for allocation of capital under Basel II apart from being desirable from the point of view of risk management and efficient use of capital, RBI said.