WELCOME

PRESENTED BY Vaishali s. patil (18) Priyanka j. lule (6) Sujata b. thorat (21) Megha b. patil (14) PRESENTED TO MS.kala

CREDIT RATING AGENCIES

 INTRODUCTION
DEFINITION
A Credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves. In some cases, the servicers of the underlying debt are also given ratings

THE ROLE OF CREDIT RATING AGENCIES: What Credit Rating Agencies Do? Types of Credit Rating Agencies
Three of the largest CRAs 1.Moodys, 2.S&P, 3.Fitch

THE DETERMINANTS OF RATINGS

The default-risk assessment and quality rating assigned to an issue are primarily determined by three factors i) The issuer's ability to pay, ii) ' The strength of the security owner's claim on the issue, and iii) The economic significance of the industry and market place of the issuer.

RATING METHODOLOGY
Each agency's rating process usually includes fundamental analysis of public and private issuer-specific data, 'industry analysis, and presentations by the issuer's senior executives, statistical classification models, and judgement.

Key areas considered in a rating include the following: Business Risk Financial Risk Management Evaluation Business Environmental Analysis

 CREDIT RATING AGENCIES IN INDIA

i) Credit Rating and Information Services of India Limited (CRISIL). ii) Investment Information and Credit Rating Agency of India Limited (ICRA) . iii) Credit Analysis and Research Limited (CARE). iv) Duff and Phelps Credit Rating of India (Pvt.) Ltd.

 BENEFITS OF CREDIT RATING

Investors Issuers of Debt Instruments Financial Intermediaries Business Counter-parties Regulators

A number of research studies suggest that the determinants of credit rating and yield
spread for corporate bonds include:

i) debt ratios, ii) earnings-levels, iii) earnings-variability, iv) interest coverage, and v) pension obligations.

LIMITATIONS OF CREDIT RATINGS

Credit ratings are changed when the agencies feel that sufficient changes have occurred. The use of credit ratings imposes discrete categories on default risk, while, in reality default risk is a continuous phenomenon. owing to time and cost constraints, credit ratings are unable to capture all characteristics for an issuer and issue.

Challenges to New CRAs

A lack of a rating history. A lack of resources and issuer access. Special conflicts of interest.

THANK YOU