CREDIT RATING

Group members:
vaishali,rahul,aatif,rajesh,sunita
Credit rating
 Itis an indicator of ability &willingness of
the issuer of a financial debt instrument to
meet the debt service obligations as
&when they arise.
 A rating is specific to a debt instrument &
these instruments are graded in terms of
the credit risk associated with them.
Needs of credit rating
 It is extremely useful to investors,
corporate, banks &financial institutions.
 The lesser known companies can
approach to the market on the basis of
their ratings.
 It also minimizes the role of name
recognition.
Regulatory framework

 Credit rating agencies are regulated by the

sebi.The main elements of regulations are:
 Their registration
 their general obligations
 Restrictions on the rating of securities
 Procedure of investigation and inspection
 Action in case of default
Credit rating agencies
 Creditrating agencies are:
 CRISIL ltd
 ICRA ltd
 CARE ltd
 FITCH ltd
CRISIL LTD
 It was promoted in 1887 jointly by ICICI Ltd & Unit Trust
of India
 It started its operation on 1 jan 1988
 It offers its share for public in 1993
 It forged a strategic business alliance with Standard&
Poor’s rating group, New York in 1996
 It was set up to rate the debt obligations that would guide
the investors as to the risk of timely payment of interest
& principal.
 CRISIL's leadership position continues with over
a 70% share of the Indian ratings market
Objectives
 To assist both individual &institutional investors
in making investment decisions in fixed interest
securities.
 To enable companies to mobilize funds in large
amount from a wide investor base at a fair cost.
 To enable intermediaries to place debt instrument
with investors by providing them with an effective
marketing tool.
 To provide regulators with a market driven
system for bringing about discipline & a healthy
growth of capital markets.
Division of services
 Credit rating services
 Advisory services
 Training services
 First creditability &evaluation services
ICRA LTD
 Promoted by IFCI ltd
 To meet the requirement of the companies
based in the northern parts of the country.
 Other promoters were UTI,LIC,GIC, EXIM
bank, hdfc ltd
 It started its operation in 1991
Division of services
 Rating services
 Information services
 Advisory services
Rating process
 New issues/instrument
 Review of rating
Rating process of new issues
 Rating agreement & assignment of
analytical team
 Meeting with management
 Rating committee
 Communication to the issuer
 Dissemination to the public
Rating review for possible change
 New data of company
 Rating change
 Credit rating watch
Corporate credit ratings
 The Standard & Poor's rating scale is as
follows, from excellent to poor: AAA, AA+,
AA, AA-, A+, A, A-, BBB+, BBB, BBB-,
BB+, BB, BB-, B+, B, B-, CCC+, CCC,
CCC-, CC, C, D. Anything lower than a
BBB- rating is considered a speculative or
junk bond
Source of reference
 Financialservices- M.Y khan
 www.crisil.com
 www.icra.com