CREDIT RATING AGENCIES

TOPICS

• MEANING AND DEFINITION• INTERNATIONAL AGENCIES• CREDIT RATING AGENCIES IN INDIA• REFERENCES

MEANING

• Credit rating agency means a body corporate which is engaged in the business of rating of securities offered by companies.

• The debt instruments rated by CRAs include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, and collateralized securities, such as mortgage-backed securities and collateralized debt obligations.

DEFINITION OF CREDIT RATING

• According to CRISIL, credit rating is “an unbiased and independent opinion as to issuer’s capacity to meet its financial obligations. It does not constitute a recommendation to buy , sell or hold a particular security”

• According to Moodys , “ratings are designed exclusively for the purpose of grading bonds according to their investment qualities”

INTERNATIONAL AGENCIES

• MOODY’S INVESTORS SERVICES• STANDARD AND POOR’S CORPORATION(S &P)

MOODY’S INVESTORS SERVICES

• John Moody founded the Moody’s agency at the beginning of the 20th century.

• It undertakes the rating of wide range of debt related securities , international issues , commercial papers , etc. Both in USA and international markets.

• Other services include- assessing financial strength of insurance companies , mutual funds, banks , public utilities.

STANDARD AND POOR’S CORPORATION(S &P)

• One of the first credit rating institutions which has a history of 157 years, founded in the year 1860.

• Offers rating on wide range of debt securities , both in the US and overseas markets.

OTHER INTERNATIONAL AGENCIES

• Duff and Phelps Credit Rating Company• Japan Credit Rating Agency• Fitch Investors Service• Thomason Bank Watch• IBCA Ltd

CREDIT RATING AGENCIES IN INDIA

• CRISIL• ICRA• CARE• FITCH RATINGS INDIA PVT. LTD.• ONICRA• SMERA• BRICKWORK RATING INDIA PVT. LTD.

CRISIL• CRISIL stands for Credit Rating Information Services of

India Ltd.• Promoted by ICICI Ltd. Along with UTI and some banks

and insurance companies as a public limited company.• Headquarter – Mumbai.• Services offered are: a) Credit rating servicesb) Advisory servicesc) Research and information services• CRISIL is the largest credit rating agency in India and the

market leader.• S & P is the major shareholder of CRISIL with a stake of

56.5%.

CRISIL DEBENTURE RATING SYMBOLS

SYMBOL SAFETY LEVEL

AAA HIGEST SAFETY

AA HIGH SAFETY

A ADEQUATE SAFETY

BBB MODERATE SAFETY

BB INADEQUATE SAFETY

B HIGH RISK

C SUBSTANTIAL RISK

D DEFAULT

CRISIL FIXED DEPOSIT RATING SYMBOLS

SYMBOL SAFETY LEVEL

F AAA HIGHEST SAFETY

F AA HIGH SAFETY

F A ADEQUATE SAFETY

F B INADEQUATE SAFETY

F C HIGH RISK

F D DEFAULT

ICRA• ICRA stands for Investment Information and Credit

Rating Agency Ltd.• Promoted by IFCI,SBI,UTI(Unit Trust of

India),LIC,GIC(General Insurance Corporation),HDFC,UCO bank etc.

• Moody’s Investors Service is the largest shareholder.• Services rendered by ICRA are:a. Rating servicesb. Information servicesc. Advisory services

ICRA LONG-TERM DEBT INSTRUMENT RATING SYMBOLS

SYMBOL SAFETY LEVEL

L AAA HIGHEST SAFETY

L AA HIGH SAFETY

L A ADEQUATE SAFETY

L BBB MODERATE SAFETY

L BB INADEQUATE SAFETY

L B RISK PRONE

L C SUBSTANTIAL RISK

L D DEFAULT

ICRA MEDIUM-TERM INSTRUMENTS(ICLUDING FIXED DEPOSITS & CERTIFICATES OF DEPOSITS)

SYMBOL SAFETY LEVEL

M AAA HIGHEST SAFETY

M AA HIGH SAFETY

M A ADEQUATE SAFETY

M B INADEQUATE SAFETY

M C RISK PRONE

M D DEFAULT

ICRA SHORT-TERM INSTRUMENTS(INCLUDING COMMERCIAL PAPER) RATING SYMBOLS

SYMBOLS SAFETY LEVEL

A 1 HIGHEST SAFETY

A 2 HIGH SAFETY

A 3 MODERATE SAFETY

A 4 RISK PRONE

A 5 DEFAULT

CARE• Credit Analysis and Research Ltd• Incorporated in 1993, is based in Mumbai• Deals with advisory services, information and credit rating.• Promoted by UTI, Canara Bank, IDBI and many other reputed

banks and companies dealing with financial services.• VARIOUS SERVICES OFFERED ARE:a) Rating Servicesb) Credit Reportsc) Valuationsd) Credit Appraisale) Reviewing Debt Market• In 1994 commenced publication of ‘CAREVIEW’ a quarterly

journal of CARE Ratings.

CARE LONG-TERM AND MEDIUM-TERM INSTRUMENTS RATINGS SYMBOLSSYMBOLS SAFETY LEVEL

CARE AAA HIGHEST SAFETY

CARE AA HIGH SAFETY

CARE A ADEQUATE SAFETY

CARE BBB MODERATE SAFETY

CARE BB INADEQUATE SAFETY

CARE B SUSCEPTIBLE TO DEFAULT

CARE C HIGH INVESTMENT RISK

CARE D DEFAULT OR LIKELY TO BE IN DEFAULT

CARE SHORT-TERM INSTRUMENTS RATING SYMBOLS

SYMBOLS SAFETY LEVEL

PR 1 HIGHEST SAFETY

PR 2 HIGH SAFETY

PR 3 ADEQUATE SAFETY

PR 4 INADEQUATE SAFETY

PR 5 DEFAULT OR LIKELY TO BE IN DEFAULT

FITCH RATINGS INDIA PVT. LTD• DCR India Pvt Ltd or Duffs and phelps Credit rating India Pvt

Ltd was a joint venture between Duffs & Phelps and Alliance group.

• It was first private sector credit rating agency in India.• Fitch Investors Service, USA accquired 33% stake in DCR and

has been renamed as Fitch Ratings India Pvt Ltd.• DCR India Pvt Ltd has played an important role in rating

India’s forex debt obligations.• Rates the securities of all kinds of companies including

banking and insurance.• Rating symbols used by Fitch are the same as that of CRISIL.

ONICRA•First Individual Credit Rating agency in India. Individual Credit Rating is an objective assessment of the risk attached to a financial transaction with respect to an individual.•Promoted by ONIDA, famous for consumer durables.•ONICRA was incorporated on the business of analysis, rating, evaluation and appraisal of obligation, dues ,debts,commitments of an individual.

SMERA• Founded in 2005• Headquarters situated in Mumbai• Exclusively set up for micro, small and medium enterprises.• It provides ratings which enable MSME, SME’S, Corporates

to raise bank loans at competitive rates of interest.• Registration with SEBI as Credit Rating Agency and

accreditation by RBI as an external credit assesment Institution to rate bank loans has paved way for SMERA to rate/grade various instruments such as IPO, NCD’s, Commercial Papers, Bonds, FD’s etc.

BRICKWORK RATINGS INDIA PVT. LTD.

• Incorporated in 2007• Corporate office in Banglore• BWR, A SEBI registered Credit Rating agency has also been

accredited by RBI and empanelled by National Small Industries Corporation with an objective of providing strong research based information for Indian Investors.

• Provides rating services for various capital market instruments, Financial Instituitions, Muncipal and Urban Local Bodies.

• BWR also provides other rating services such as Corporate Governance Ratings, FD Ratings etc.

TRANS UNION LTD(CIBIL)• Credit Information Bureau (India) Ltd incorporated in 2000• India’s first credit information bureau• Provides credit information rather than credit rating• It is a repository of information• Data collected by CIBIL is used for preparing Credit Information Report,

popularly known as CIR.• Provides information to its members in the form of these Credit

Information Reports• Members include:All leading banks, financial institutions ,NBFC, housing finance companies

CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards.

REFERENCES

• FINANCIAL SERVICES TEXTBOOK FOR 4TH SEMESTER B.COM BY DR.ANTONY THOMAS(M.G. UNIVERSITY)

• www.wikipedia.org• www.google.co.in

TEAM MEMBERS: NANDINI JAIRAJ MALAVIKA PRAKASH ALFRED GEORGE JUGAL VED