Model Validation Methodology

 Under Basel II, banks are permitted to use internal ratings-based (IRB) approaches to determine the risk weights relevant for calculating the capital charge according to their own credit scoring/rating models. Consequently, banks are obliged to validate their internal processes for differentiating risk as well as for quantifying that risk. The primary purpose of validation is to examine whether the internally constructed scoring model can fully explain the credit status of borrowers. For a detailed view of ICRA Analytics Limited’s approach and methodology on model validation,.please write to us at sourav.das@icraanalytics.com