Credit Rating

1
Credit Rating

• The process of assigning a symbol with specific
  reference to the instrument being rated, that
  acts as an indicator of the current opinion on
  relative capability on the issuer to service its
  debt obligation in a timely fashion.

2
Credit Rating

• Specificity To a debt instruments
• Relativity Rating based on the capability
  willingness of the issuer of the instrument to
  service debt obligations.
• Guidance To the investors/creditors
• Not a Recommendation No recommendation to buy,
  hold or sell an instrument

3

• Broad Parameters Information supplied by the
  issuer from other sources including personal
  interactions.
• No guarantee
• Quantitative Qualitative Information

4
Credit Rating Process

• Contract Between Rater and Client
• Sending Expert Team to Clients Place
• Data Collection
• Data Analysis
• Discussion
• Credit Report Preparation
• Submission to Grading Committee
• Grade Communication to client

5
Credit Rating System Growth Factors

• Every Time a rating is assigned, the agencys
  name, integrity and credibility are online and
  subject to inspection by the whole community
• Factors Like
• Objectivity of opinions, Professionalism
• Relevant Expertise, Strict rules of
  confidentiality

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Growth Factors

• Credibility and Independence
• Capital Market Mechanism
• Disclosure Requirements
• Credit Education
• Creation of Debt Market

7
International Rating agencies

• Moodys Investors Service (Moodys)
• Standard Poors corporation (SP)
• Duff and Phelps Credit Rating Co. (DCR)
• Japan Credit Rating Agency (JCR)

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CRISIL

• Credit Rating and Information Services of India
  Ltd.
• Jointly promoted by ICICI, Nationalized and
  foreign banks, and Insurance Companies in 1987.
• Services Offered are Rating, Information
  Services, infrastructure and consultancy.

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ICRA

• Investment Information and Credit Rating Agency
  of India Ltd.
• Promoted in 1991 by IFCI 21 other shareholders
  comprising nationalized banks.
• Services offered are Rating Services, Advisory
  services and investment information services.

10
CARE

• Credit Analysis Research
• Incorporated in 1992 with the combined efforts of
  IDBI, and several other banks insurance
  companies.

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Ratings

• ICRA (Debentures, Bonds Preference Shares)
• LAAA (highest safety), LAA, LAA, LAA-(High
  safety), LA,LA, LA-(Adequate safety), LBBB,
  LBBB, LBBB-(Moderate Safety), LBB, LBB,
  LBB-(Inadequate safety), LB, LB, LB- (Risk
  Prone), LC, LC, LC-(Substantial Risk), LD
  (Default extremely speculative)

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Ratings by CRISIL

• AAA (Highest Safety)
• AA (High Safety)
• A (Adequate Safety)
• BBB (Moderate Safety)
• BB (Inadequate Safety)
• B (High Risk)
• C (Substantial Risk)
• D (Default)

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