CREDIT RATING

GRADE THY SELF

Introduction

An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities.
An inevitable part before Fund Raising and Borrowing. Scope: Country, Company, Corporate Governance Individual, Issue,

Rating Agencies in India

SEBI approval is required to function as Rating Agency in India. Rating Agencies Functioning in India: Credit Rating Information Services Limited (CRISIL) Investment Information and Credit Rating Agency of India (ICRA) Credit Analysis and research (CARE) FITCH. Brickwork Ratings (Added in 2008) SMERA (SIDBI and Dun and Bradstreet)

Rating in Financing

Credit Rating Rating of Issuer Rating of Issue

Rating Scale for Issue Rating

Credit Ratings - Long Term Scale Credit Ratings - Short Term Scale Credit Ratings - Long Term Structured Finance Scale Credit Ratings - Short Term Structured Finance Scale Credit Ratings - Fixed Deposit Scale Credit Ratings - Corporate Credit Scale

Rating Process

Credit Rating Flow Chart

Rating Framework

The Credit Rating Agency would check upon these prior to adjudicating the rating.
Provide opinion on the Credit Risk of the firm. B. Assessment of Marketable Securities which could be liquidated. C. Secondary Cash Flows have a greater bearing in Short Term Ratings. D. Analysis of Business Risk and Financial Risk.
A.

Benefits of Credit Rating

Credit Rating Benefits

To Investors

To Issuers

To Businesses and FIs

To Intermediaries

To Investors

Investors most often use Credit Ratings to help assess Credit Risk and to compare different issuers and instrument issues when making investment decisions and managing their portfolios. The institutional investors may use Credit Ratings to establish thresholds for credit Risk and Investment Guidelines. An indication of Credit Quality.

To Issuers

To provide independent views of their creditworthiness and the Credit Quality of their issues. Impact on Interest Rate/ Coupon Rate / Dividends.

Reputation in Market.
Measure of Financial Performance.

To Businesses and Financial Institutions

Assess counterparty risk, which is the potential risk that a party to a Credit Agreement may not fulfill its obligations.

Analyze Credit Exposure

To Intermediaries

Facilitate the flow of Capital from Investors to issuers. Enable package formulation of Instruments.