Indian Credit Ratings

Only available on StudyMode
  • Topic: Credit rating, Credit rating agency, Credit score
  • Pages : 13 (3438 words )
  • Download(s) : 54
  • Published : March 28, 2013
Open Document
Text Preview
ASSIGNMENT

ON

CREDIT RATING AGENCIES

SUBMITTED TO:SUBMITTED BY:
Ms. AnshuShweta (1175041)
A.P. RBIMMBA- RBIM
4th Sem
INDEX

S. NO.| CONTENTS| PAGE NO.|
1. | CREDIT RATING MEANING| 3|
2.| INDIAN CREDIT RATING AGENCIES| 4|
3.| NEED, METHODOLOGY, BENEFITS, FUNCTIONS| 4,5,6,7|
4. | ADVANTAGES & DISADVANTAGES| 7,8,9,10|
5.| CRISIL & SYMBOLS| 11|
6.| CARE & SYMBOLS| 12|
7.| ICRA & SYMBOLS| 13|
8.| FITCH & SYMBOLS| 15|
9.| REFRENCES| 17|

CREDIT RATING

An assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities. Credit is important since individuals and corporations with poor credit will have difficulty finding financing, and will most likely have to pay more due to the risk of default. A credit rating evaluates the credit worthiness of a debtor, especially a business (company) or a government. It is an evaluation made by a credit rating agency of the debtor's ability to pay back the debt and the likelihood of default. Credit ratings are determined by credit ratings agencies. The credit rating represents the credit rating agency's evaluation of qualitative and quantitative information for a company or government; including non-public information obtained by the credit rating agencies analysts. Credit ratings are not based on mathematical formulas. Instead, credit rating agencies use their judgment and experience in determining what public and private information should be considered in giving a rating to a particular company or government. The credit rating is used by individuals and entities that purchase the bonds issued by companies and governments to determine the likelihood that the government will pay its bond obligations. A poor credit rating indicates a credit rating agency's opinion that the company or government has a high risk of defaulting, based on the agency's analysis of the entity's history and analysis of long term economic prospects. A credit rating estimates the credit worthiness of an individual, corporation, or even a country. It is an evaluation made by credit bureaus of a borrower’s overall credit history. A credit rating is also known as an evaluation of a potential borrower’s ability to repay debt, prepared by a credit bureau at the request of the lender. Credit ratings are calculated from financial history and current assets &  liabilities. A credit rating tells a lender or investor the probability of the subject being able to pay back a loan.

INDIAN CREDIT RATING AGENCIES
A Credit Rating Agency is a company that assigns credit ratings for issuers of certain types of debt obligations as well as debt instruments. Four Main Credit Rating Agencies in India:
1. Credit Rating Information Services of India Limited (CRISIL), Associate of Standards & Poor’s 2. Credit Analysis & Research Ltd. (CARE Ratings)
3. Investment Information and Credit Rating Agency of India Limited (ICRA), Associate of Moody’s Investors Service 4. Fitch Ratings

Who needs credit ratings:
1. Commercial Banks
2. Mutual Funds
3. Investment Banks
4. Leasing companies
5. Insurance companies
6. Bond Issuers

Why the need of Credit Rating:
As said earlier, credit rating is an opinion expressed by an independent professional organization, after making a detailed study of all relevant factors. Such an opinion is of great assistance to investors in making investment decisions. It also helps the issuers of debt instruments to price their issues correctly and to reach out to investors and win their confidence. Regulators like Reserve Bank of India (RBI) and Securities & Exchange Board of India (SEBI) often use credit rating to determine eligibility criteria for some instruments. For example, the RBI has stipulated a minimum credit rating by an...
tracking img