Credit Rating Services – Risk Evaluation Agencies
Introduction
If a company asks you for a loan, how do you know it will repay? You can't analyze its balance sheet. You rely on Credit Rating.
1. What is Credit Rating?
An unbiased opinion on the ability and willingness of an entity to service its debt obligations.
- Symbolic: Expressed in letters (AAA, AA, B, D).
- Not a Recommendation: It doesn't say "Buy this bond". It just considers the risk.
2. Rating Symbols (Standard)
Rating Symbols (Long Term Debt)
CRISIL
- CRISIL AAA (Highest Safety)
- CRISIL AA (High Safety)
- CRISIL A (Adequate Safety)
- CRISIL BBB (Moderate Safety)
- CRISIL D (Default)
VS
ICRA
- ICRA AAA (Highest Safety)
- ICRA AA (High Safety)
- ICRA A (Adequate Safety)
- ICRA BBB (Moderate Safety)
- ICRA D (Default)
3. Major Agencies in India
- CRISIL (Owned by S&P Global).
- ICRA (Owned by Moody's).
- CARE.
- India Ratings (Fitch).
4. Benefits
- For Investor: Easy risk assessment. "AAA is safe".
- For Company: High rating = Low interest rate on loans.
Summary
- Focus: Debt Repayment Capacity.
- Agencies: CRISIL, ICRA, CARE.
- Grade: Investment Grade (BBB-) vs Junk.
Quiz Time! 🎯
Test Your Knowledge
Question 1 of 4
1. Which symbol typically denotes the 'Highest Safety' in credit rating?