credir rating

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Credit rating agencies
PRESENTED BY DIVYA MOUNIKA
SUSHMA SHAHADHA
MAHENDRA ABHIMANYU HARI
KRISHNA
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• CONTENTS
• INTRODUCTION
• DEFINATION
• IMPORTANCE
• CREDIT SCORE
• BENEFIT TO INVESTOR
• BENEFIT TO COMPANY
• CREDIT RATING PROCESS
• CREDIT RATING AGENCY
• CRISILS RATING PROCESS
• SEBI GUIDELINES
• CONCLUSION

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The first mercantile credit agency was set up
in New York in 1841 to rate the ability of
merchants to pay their financial obligations.
Later on, it was taken over by Robert Dun. This
agency published its first rating guide in
1859. India was perhaps the first amongst
developing countries to set up a credit rating
agency in t988. With the increasing market
orientation of the Indian economy, investors
value a systematic assessment of two types of
risks, namely "business risk" arising out of the
"open economy" and linkages between money,
capital and foreign exchange markets and
"payments risk".

• INTRODUCTION

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According TO sp CREDIT RATINGS HELP investors
By providing an easily recognizable, simple tool
that couples a possibly unknown issuer with an
informative and meaningful symbol of credit
quality" According to Moody's "A rating is an
opinion on the future ability and legal
obligation of the issuer to make timely payments
of principal and interest on a specific
fixed-income security.

• DEFINATION

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To compare the loan on the basis of quality of
credit and loan.Credit rating agencies also
assist to portfolio monitoring Credit Rating
Credit quality of transparency. Credit rating
of money market securities.

• IMPORTANCE OF CREDIT RATING

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35 - Previous Credit Performance30 - Current
Level of Indebtedness15 - Time Credit has been
in use 15 - Types of Credit Available 5 -
Pursuit of New Credit

• OVERALL CREDIT SCORE

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Helps in Investment DecisionChoice of
InstrumentSaves Investor's Time and Effort

• BENEFIT CREDIT RATING TO INVESTER

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Improves Corporate Image Wider Audience for
Borrowing Helps in Growth and Expansion

• BENEFIT CREDIT RATING TO COMPANY

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• CREDIT RATING PROCESS

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1)CREDIT RATING AND INFORMATION SERVICES OF INDIA
LTD.(CRISIL) i. CRISIL was set up in the year
1987.ii. It was set up in order to rate the
firms and 1 en entered into the field of
assessment service for the banks.Iii. The head
office of the company is located at Mumbai and it
has established offices outside India also. Iv.
CRISIL is a global analytical company providing
ratings, research and risk and policy advisory
services. V. CRISIL is the largest credit
rating agency in India. Vi. CRISIL's majority
shareholder is STANDARD and POOR's.

• CREDIT RATING AGENCY

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Cont.2)ICRA ICRA Limited (formerly Investment
Information and Credit Rating Agency of India
Limited) was set up in 1991 by leading
financial/investment institutions, commercial
banks and financial services companies as an
independent and professional Investment
Information and Credit Rating Agency. ICRA's
five point IPO Grading Scale ?IPO Grade 5
Strong fundamentals ?IPO Grade 4 Above-average
fundamentals gtIPO Grade 3 Average fundamentals
?IPO Grade 2 Below-average fundamentals ?IPO
Grade 1 Poor fundamentals
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3) CARE ((Credit analysis and research limited))
CARE Ratings commenced operations in April 1993
and over nearly two decades, it has established
itself as the second-largest credit rating agency
in India. With the rating volume of debt of
around Rs.33,062 bn (as on June 30, 2011). 4)
dcr(duff phelps credit rating india
limited)It was founded in 1932 to provide high
quality investment research services focused on
the utility industry. Over the decades, it
evolved into a diversified financial services
firm that provides financial advisory, investment
banking, credit rating and investment management
services.
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SEBI Issued Guidelines to Credit Rating Agencies
CRAs should maintain records of the rating
committee. Information about the historical
default rates of their rating categories. CRAs
should ensure that its analysts do not
participate in any kind of marketing and business
development. CRAs while rating structured
finance products, are barred from providing
consultancy or advisory services regarding the
design of the structured finance instrument.
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Conclusion ? Credit rating is an input for
decision making. ? A credit rating is not a
recommendation to buy, hold or sell a security. A
rating is one of the inputs that is used by
investors to make an investment decision. ?
Investors expect higher returns for lower rated
instruments. ? Rating agencies do not comment
on the return being offered on a security. Also,
investors use several other factors like level of
portfolio diversification and liquidity levels of
the security etc. in making investment decisions.

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Thank you