PRESENTED BY……

AMRUTA BHOSLE- 08
Nilam Gadda -12
Prachi Kulkarni -27
Nikita Parab - 42
Anagha Rane -51

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 1..CREDIT RATING INTRODUCTION
A credit rating assesses the credit
worthiness of an individual, corporation, or
even a country. It tells a lender or investor
the probability of the subject being able to
pay back a loan.

Credit ratings are calculated from

financial history and current assets and
liabilities.

The ratings are expressed in code

numbers which can be easily
comprehended by the investors.

poor credit rating indicates a high risk

of defaulting on a loan, and thus leads to
high interest rates.

Credit rating, as exists in India, is done

for a specific security and not for a
company as a whole.
A debt rating is not one time evaluation
of credit risk, which can be regarded as
valid for the entire life of the security.

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 2..NEED FOR CREDIT RATING

It is necessary in view of the growing

number of cases of defaults in payment of
interest and repayment of principal sum
borrowed by way of fixed deposits, issue of
debentures or preference shares or
commercial papers.

Maintenance of investors’ confidence,

since defaults shatter the confidence of
investors in corporate instruments.

Protect the interest of investors who

can not into merits of the debt instruments
of a company.

Motivate savers to invest in industry

and trade.

3..OBJECTIVES OF CREDIT RATING

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 The main objective is to provide
superior and low cost information to
investors for taking a decision regarding
risk- return trade off, but it also helps to
market participants in the following ways;
•Improves a healthy discipline on
borrowers,
•Lends greater credence to financial
and other representations,
•Facilitates formulation of public
guidelines on institutional investment,
•Helps merchant bankers, brokers,
regulatory authorities, etc., in discharging
their functions related to debt issues,
•Encourages greater information
disclosure, better accounting standards,
and improved financial information (helps
in investors protection),
•May reduce interest costs for highly
rated companies,
•Acts as a marketing too..

4..FUNCTIONS OF CREDIT RATING

AGENCIES

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• Superior information.

• Low cost information.

• Basis for proper risk, return & Trade off.

• Healthy discipline on corporate

borrowers.

• Formulation of public policy guidelines

on Institutional investment.

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 5..BENEFITS OF CREDIT RATING
FOR INVESTORS
• Safeguards against bankruptcy

• Recognition of risk

• Credibility of the issuer

• Easy understandability (ratings) of the

investment proposal

• Savings of resources (time and money)

• Independence of investment and quick

investment decision

• Choice of investments

• Good bye to thumb rules

• Benefits of rating surveillance

• Low cost information

6..BENEFITS OF CREDIT RATING

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 FOR RATED COMPANIES
• Low cost of borrowing

• Wider audience for borrowing

(Increase the investor population)

• Rating as a marketing tool

• Self discipline by companies

(Encourages financial Discipline)

• Reduction of cost in public issues

(attract investors with least efforts)

• Motivation for growth

• Sources of additional certification

• Forewarns (caution) risk

• Merchant bankers job made easy

• Foreign collaborations made easy

7..BENEFITS OF CREDIT RATING

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 FOR BROKERS & FINANCIAL
INTERMEDIARIES

• Saves time, money, energy, and manpower

in convincing their clients about
investments.

• Less effort in studying company’s credit

position to convince their clients.

• Easy to select profitable investment

security.

• Helps to improve business.

8..CREDIT RATING AGENCIES IN INDIA

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1.Credit Rating Information Services
Limited (CRISIL)

2.Investment Information and Credit Rating

Agency of India (ICRA)

3.Credit Analysis and research (CARE)

4.Duff Phelps Credit Rating Pvt. Ltd. (DCR

India)

5.Onicra Credit Rating Agency of India

Limited: Is an established player in the
individual credit assessment and scoring
services space in the Indian market

9…CRISIL

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 Description(with regard to
Symbol(Rating the likelihood of meeting the
category) debt obligations on time)

AAA Highest Safety

AA High Safety

A Adequate Safety

BBB Moderate Safety

BB Inadequate Safety

B High Risk

C Substantial Risk

D Default

A) INTRODUCTION OF CRISIL

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 Credit Rating and Information
Services of India Ltd. (CRISIL) (BSE:
500092) is India's leading Ratings,
Research, Risk and Policy Advisory
Company based in Mumbai.
CRISIL offers domestic and international
customers (IREVNA, international arm and
a division of CRISIL handles international
customers) with independent information,
opinions and solutions related to credit
ratings and risk assessment; energy,
infrastructure and corporate advisory;
research on India's economy, industries
and companies; global equity research;
fund services; and risk management.
CRISIL’s majority shareholder is
Standard & Poor's, a division of The
McGraw-Hill Companies and the world's
foremost provider of financial market
intelligence.IREVNA is the off-shoring
Knowledge Process Outsourcing arm of
CRISIL, with niche analytical skills to cater
to financial analysis.

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 B) CREDIT RATING INFORMATION
SERVICES LIMITED (CRISIL)

CRISIL provides rating and risk

assessment services to manufacturing
companies, banks, non banking financial
companies, financial institutions, housing
finance companies, municipal bodies and
companies in the infrastructure sector.

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C) CREDIT RATING PROCESS

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 D) RATING METHODOLOGY OF CRISIL

Key factors considered for rating are:-

 Business Analysis,

 Financial Analysis,

 Management evaluation,

 Regulatory and competitive

environment,

 Fundamental analysis.

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 10..CARE
• A full service rating company that offers a
wide range of rating and grading services
across sectors.

• Incorporated in 1993 by consortium of

Banks/financial institutions in India. The
three largest shareholders of CARE are
IDBI Bank, Canara Bank and State Bank of
India.

• Registered with SEBI under the Securities

& Exchange Board of India (Credit Rating
Agencies) Regulations, 1999

• CARE’s Ratings are recognized by Govt. of

India and all regulatory authorities like
RBI and SEBI

• CARE is a founder member of Association

of Credit Rating Agencies in Asia (ACRAA).

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A) Range of Rating & Grading
Services

Banks and
FI ratings
IPO SME/SSI
Grading ratings
Structured Finance Corporate
Ratings ratings
Sub-sovereign Infrastructure
ratings Services ratings
Issuer
Rating
Insurance/ CPA Corporate Governance
ratings ratings
Construction
Grading of
Grading
MTI
Fund credit Quality
rating

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 B) REGULATORY RECOGNITION

• CARE Ratings are recognized by

Government of India and regulatory
agencies in India.

• CARE is registered with the Securities and

Exchange Board of India.

• CARE Ratings are also recognized by RBI,

NABARD, NHB and NSIC.

• RBI has also recognized CARE Ratings as

an eligible external credit rating agency
for the purpose of Basel II implementation
in India.

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 C) INDEPENDENT

• CARE is an independent rating agency

promoted by major banks and financial
institutions in India.

• The three largest shareholders of CARE

are IDBI Bank, Canara Bank and State
Bank of India.

• CARE is a board managed company with

eminent professionals on the board.

• The entire Board comprises of

Independent Directors.

• CARE is the only rating agency in India

which operates with an independent rating
committee comprising of senior and
reputed professionals.

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 D) PROFESSIONAL
• CARE Ratings endeavor has been to
provide investors and risk managers with
independent, authentic and insightful
credit opinions based on detailed in-depth
research, which encompasses detailed
analysis of risks that affect credit quality
of an issuer.
• CARE's analyst strength consists of large
number of well qualified and multi-faceted
professionals from diverse backgrounds
such as; financial analysts, economists,
sector specialists, chartered accountants,
chartered financial analysts and financial
risk managers.
• CARE is a founder member of the
Association of Credit Rating Agencies in
Asia (ACRAA) and is actively in dialogue
with Asian and International rating
agencies.
• CARE also follows a well defined Code of
Conduct for its Directors, Rating
Committee Members and Analysts for

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 professional conduct and for avoidance of
conflict of interests
E) EXPERIENCED
• CARE has over a decade of experience in
rating various types of instruments.

• CARE assigned its first rating in November

1993 and upto March 31, 2010, CARE had
completed 7654 rating assignments for an
aggregate value of about Rs 23121 bn.

• With a large number of qualified and

experienced multi-faceted analyst and
presence in all major metros of India,
CARE has a unique understanding of the
local business, cultural and value systems
and factors which affect the Indian
economy.

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 F) WIDE SECTORAL COVERAGE.

• CARE is a full service rating company

offering a wide range of rating and grading
services which includes rating debt
instruments/enterprise ratings of
Corporate, Banks, Financial Institutions
(FIs), Public Sector Undertakings (PSUs),
State Government bodies, Municipal
Corporations, Non-banking Finance
Companies (NBFCs), SMEs, Micro finance
institutions, Structured finance
Securitization transactions.

• In addition, CARE Ratings undertakes

Corporate Governance ratings, Mutual
Fund Credit quality ratings, IPO grading,
Claims Paying Ability rating of Insurance
Companies, Grading of Construction
Entities and Issuer ratings.

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 G) MARKET ACCEPTANCE

• CARE has a significant rating coverage of

the Indian Banks and Financial
Institutions, who are also amongst the
major investors in the Indian bond
markets.

• CARE ratings are also used by a wide

range of investors including Mutual Funds,
Insurance companies, Provident funds,
Corporate and Retail investors.

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 H) RATING EXPERIENCE
(AS AT MARCH 2010)

 Total Assignments Completed 7654

 Total Instruments Rated 7206

 Total Volume of Debt Rate Rs.23121

 Total Issuers Rated 2811

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I) State Govts., whose entities are
rated by
CARE

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 All rated

Indian states have a CARE rating

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