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Introduction to Credit Rating

A credit rating assesses the credit worthiness

of an individual, corporation, or even a
country. Credit ratings are calculated from
financial history and current assets and
A credit rating tells a lender or investor the
probability of the subject being able to pay
back a loan.
A poor credit rating indicates a high risk of
defaulting on a loan, and thus leads to high
interest rates.


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


is important since individuals and

corporations with poor credit will have
difficulty finding financing, and will most likely
have to pay more due to the risk of default.


Credit rating is an assessment of the capacity of the

issuer of debt security by an independent agency, to
pay interest and repay principal as per the terms of
issue of debt.
The ratings are expressed in code numbers which
can be easily comprehended by the lay investors.
Credit rating, as exists in India, is done for a specific
security and not for a company as a whole.
A debt rating is not one time evaluation of credit risk,
which can be regarded as valid for the entire life of
the security.
A credit rating does not create fiduciary relationship
between the agency and the users

Functions of Credit Rating Agencies


Low cost information
Basis for proper risk, return & Trade off
Healthy discipline on corporate borrowers
Formulation of public policy guidelines on
Institutional investment

Benefits of Credit Rating


cost information
Quick investment decision
Independent investment decision
Investor protection

Benefits to rated companies

Sources of additional certification
Increase the investor population
Forewarns risk
Encourages financial Discipline
Merchant bankers job made easy
Foreign collaborations made easy
Benefits the industry as a whole
Low cost of borrowing
Rating as a marketing tool

Credit Rating Agencies in India


Rating Information Services Limited

Investment Information and Credit Rating
Agency of India (IICRA)
Credit Analysis and research (CARE)
Duff Phelps Credit Rating Pvt. Ltd.
(DCR India)

Credit Rating Information Services Ltd.

The first credit agency floated on January 1,
It was jointly started by ICICI and UTI with an
equity capital of 4 crores.
CRISIL is India's leading rating agency, and is
the fourth largest in the world.
With over a 60% share of the Indian Ratings
market, CRISIL Ratings is the agency of choice
for issuers and investors.
CRISIL Ratings is a full service rating agency that
offers a comprehensive range of rating services.

Credit Rating Information Services Ltd.

The principal objective of CRISIL is to rate the debt

obligations of Indian companies.

Its rating guides the investors about the risk of timely

payment of interest and principal on a particular
debt instrument.

CRISIL's rating process and rating committee

are designed to ensure that all assigned
ratings are based on the highest standards of

The rating committee comprises members

who have the professional competence to
meaningfully assess the credit analysis that
underlies the rating, and have no interest in
the entity being rated. A team of analysts
carries out the credit analysis

Credit Rating Symbols

Debenture Rating Symbols
High Investment Grades:
AAA(triple A): Highest Safety
AA (double A): High Safety
Investment Grades:
A: Adequate Safety
BBB (triple B): Moderate Safety
Speculative Grades:
BB: Inadequate Safety
B: High Risk
C: Substantial Risk
D: Default

Investment Information and Credit

Rating Agency of India (ICRA)

ICRA Limited was incorporated in 1991 as an

independent and professional company.
ICRA is a leading provider of investment
information and credit rating services in India.
With the growth and globalisation of the
Indian capital markets leading to an
exponential surge in demand for professional
credit risk analysis, ICRA has been proactive
in widening its service offerings, executing
assignments including credit ratings, equity
grading's, specialised performance gradings
and mandated studies spanning diverse
industrial sectors.

Investment Information and Credit

Rating Agency of India (IICRA)

addition to being a leading credit

rating agency with expertise in virtually
every sector of the Indian economy,
ICRA has broad-based its services for
the corporate and financial sectors,
both in India and overseas, and
currently offers its services under the
following banners:

Rating Services Information,

Grading and Reasearch Services
Advisory Services
Economic Research Outsourcing

Investment Information and Credit

Rating Agency of India (IICRA)

IICRA was set thup by Industrial Finance Corporation

of India on 16 January 1991.

It is a public limited company with an authorized

share capital of 10 crores.

The initial paid up capital of Rs. 3.50 crores was

subscribed by IFC, UTI, LIC, GIC SBI and others.

Investment Information and Credit

Rating Agency of India (IICRA)
Long term Debentures Bonds and
Preference shares-Rating Symbols
LAAA: Highest Safety
LAA: High Safety
LA: Adequate Safety
LBBB: Moderate Safety
LBB: Inadequate Safety
LB: Risk prone
LC: Substantial Risk
LD: Default, Extremely speculative

Credit Analysis and Research Limited


CARE was promoted in 1993 jointly

with investment companies, banks and
finance companies.


offered by CARE are

Credit rating
Information Service
Equity Research etc

Credit Analysis and Research Limited

Long term debt instruments-Rating Symbols
CARE AAA: Highest Safety
CARE AA: High Safety
CARE A: Adequate Safety
CARE BB: Inadequate Safety
CARE B: High Risk
For medium term debt instruments
CARE AAA: Highest Safety
CARE AA: High Safety
CARE A: Adequate Safety
CARE BB: Inadequate Safety
CARE C: High Risk