What credit rating means?

What credit rating means? Rating reflects the borrowers accountability, expected capability and inclination to pay interest and principal in a timely matter. Rating is an isolated function of a credit risk evaluation Rating is useful in differentiating credit quality Rating will involve issue specific evaluation

What a credit Rating is not

Rating is not a general purpose evaluation of the issuer. Rating is not a recommendation to buy/sell/hold security. Rating is not an extensive audit of the issuing company. Rating is not a one-time assessment of creditworthiness valid over the future life of the security.

Various Credit Rating Agencies

Indian Credit Rating Agencies CRISIL(Credit Rating information services for India Ltd) CARE(Credit Analysis and Research Ltd) ICRA(Investment Information and credit rating agency of India Ltd) DCR India( Duff and Phelps credit rating India pvt Ltd) International Credit Rating Agencies Standards and Poors Rating Moodys Rating Fitch Rating Mccarthy Rating Crisanti Rating

CRISIL
Objectives of CRISIL To assist both individual and institutional investors in making investment decisions in fixed income securities. To enable corporate to raise funds in large amounts and at a fair cost from investors. To enable intermediaries in placing their debt instruments with investors by providing them with an effective marketing tool To provide regulators with market driven system for bringing about discipline and healthy growth of capital markets.

Rating methodology and process

The following risks are analysed by CRISIL Industry risk analysis Business risk analysis Financial risk analysis Management risk analysis Fundamental risk analysis

Borrower/Corporate
Request For Rating Document Preparation

CRISIL
Analytical team conducts research Collection of information

Management Meetings and Plant Visits

Rating Committee Communication of Rating to issuer Dissemination of rating Surveillance and annual review

Appeal for review

Capacity of Debantures Fixed timely /Bonds Deposits payment of interest and principal
Highest Safety High Safety Adequate Safety AAA AA A FAAA FAA FA

Short-term Instrument

Developer Project

Structured Bond Obligations Fund Portfolios

P-1 P-2 P-3

PA1 PA2 PA3

AAA AA A

AAAf AAf Af

Moderate Safety
Inadequate Safety High Risk Substantial Risk Vulnerable to default

BBB
BB B C FB FC

P-4

PA4 -

BBB
BB

BBBf
BBf Cf

B C

Standard and Poors Ratings

Rating Obligations Long-term obligation US market long term obligations Non-US market long term obligations Euro Bond Rating Short-term obligation Commercial papers of US and non-US issuer Sovereign Rating

Rating Criteria
Likelihood of default Nature and provisions of the obligations Protection afforded to, and relative position of, the obligation in the event of bankruptcy or reorganization