The rating methodology-- based on six parameters: capital adequacy, asset quality, management quality, earnings, liquidity and systems and controls-- came up for discussion at a high-level meeting held in the RBI on Friday.

The meeting was chaired by RBI governor Bimal Jalan and attended by deputy governor SP Talwar besides State Bank of India chairman GG Vaidya, Bank of Baroda chairman K Kannan, Dena Bank chairman Ramesh Mishra, Oriental Bank chairman Dalbir Singh, chiefs of Citibank and Standard Chartered along managing directors of ICICI Bank and HDFC Bank.

Banks are rated on these six parametes on a scale of 1 to 5 and the final rating--the total of the points accumulated -- is assigned a A to E rating. Some of the strong public sector banks have been rated B by the RBI. "The central bank should gradually strengthen the rating system. Otherwise, it becomes difficult for Indian banks to benchmark themselves against the international standards, a senior banker told The Financial Express.

Bankers have asked RBI to clearly state the weightage it gives under the various heads under the CAMELS rating system. "Currently it is not very clear how the RBI rates and why a bank is given a certain rating. Bankers have asked the RBI to disclose the reason why such a rating has been given and ways of further improvement," a source said.

Bankers said that if the rating system has the desired level of transparency then the weakeness pointed out by the RBI can be brought clearly and action can be taken to get rid of that.

Bankers pointed out that while capital adequacy, earnings, asset quality and liquidity can be quantified, management and systems control cannot be qiantified. "So the weightage should be disclosed," a senior banker said.

A few banks have been complaining that the parameters stipulated by the RBI are sometimes too tough and if followed by the regulator in letter and spirit it will become very difficult for the banks to access to international markets. "Thus the banks have proposed that while tough parameters should be imposed to rate a bank, these should be gradual," a banker who attended the meeting said.

Bankers have also proposed that the RBI should continue to have a round-the-year dialogue with banks instead of going through the annual ritual of signing a memorandum of understanding (MoU) in the beggining of the year. Bankers also said that proper training should be provided to the RBI inspectors to enable them to handle more specialised subjects like derivates and foreign exchnage. "The RBI governor has accepted this viewpoint," a source said.