CREDIT

RATING
AGENCIE
S
BY- VEDANT GUPTA
BBA-A
A7006419050
 INTRODUCTION
Credit Rating is an assessment of the borrower
(be it an individual, group or company) by a
registered credit rating agency that determines
whether the borrower will be able to pay the loan
back on time, as per the loan agreement.
Needless to say, a good credit rating depicts a
good history of paying loans on time in the past.
This credit rating influences the bank’s decision of
approving your loan application at a considerate
rate of interest.
It is usually expressed in alphabetical symbols.
Although, it is a new concept in Indian financial
market but slowly its popularity has increased. It
helps investors to recognize the risk involved in
lending the money and gives a fair assessment of
the borrower’s creditability.
ROLE OF CREDIT RATING AGENCIES
A credit rating agency rates the creditworthiness of
instruments like corporate bonds, government
bonds, certificates of deposit, municipal bonds,
preferred stock, and other debt obligations that
have collateral.
These agencies evaluate the risk of a prospective
debtor by analyzing qualitative and quantitative
information about the debtor and predicting their
ability to repay the debt. In other words, it assesses
the risk of default on a debt that may arise from the
debtor failing to make the required payments.
The credit rating provided by these agencies helps
in creating a correlation between risk and return of
an instrument. Hence, they offer investors a tool to
measure the risk of any debt instrument and assess
if the returns are worth the risks.
 PROCEDURE
•  Seek information required for the rating from the company
• On receipt of required information, have discussion with the
company’s management and visit the company’s operating
locations, if required.
•  Prepare an analytical assessment report.
• Present the analysis to a committee comprising senior
executives of the concerned CRA.
•  The aforesaid committee would discuss all relevant issues and
assign a rating.
•  Communicate the rating to the company along with an
assessment report outlining the rationale for the rating
assigned.

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METHODOLOGY
1) Business Analysis- This includes an
analysis of industry risk, market
position of the company, operating
efficiency of the company and legal
position of the company.
2) Economic Analysis- In order to
evaluate an instrument an analyst
must spend a considerable time in
investigating the various economic
activities and analyse the
characteristics peculiar to the
industry, whose issue the analyst is
concerned with.
3) Financial Analysis-This includes an
analysis of accounting, quality,
earnings, protection adequacy of
cash flows and financial flexibility.
• Management Evaluation-
Track record of the management
planning and control system, depth of
managerial talent, succession plans.
• Geographical Analysis-
Location advantages and disadvantages,
backward area benefit to the
company/division/unit
• Fundamental Analysis-
Fundamental analysis is essential for the
assessment of finance companies.  This
includes an analysis of liquidity management,
profitability and financial position and interest
and tax sensitivity of the company.
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 CREDIT RATING AGENCIES IN INDIA
• 1.Credit Rating Information Services of India Limited (CRISIL):CRISIL is one of the oldest credit rating
agencies in India. It was launched in the country in 1987 following which the company went public in 1993.
Headquartered in Mumbai, CRISIL ventured into infrastructure rating in 2016 and completed 30 years in
2017.

• 2. ICRA Limited:ICRA Limited is a public limited company that was set up in 1991 in Gurugram. The
company was formerly known as Investment Information and Credit Rating Agency of India Limited. Before
going public in April 2007, ICRA was a joint venture between Moody’s and several Indian financial and
banking service organisations.

• 3.Credit Analysis and Research limited (CARE):Launched in 1993, CARE offers credit rating services to
areas such as corporate governance, debt ratings, financial sector, bank loan ratings, issuer ratings,
recovery ratings, and infrastructure ratings. Headquartered in Mumbai.

• .Brickwork Ratings (BWR):Brickwork Rating was established in 2007 and is promoted by Canara Bank. It
offers ratings for bank loans, SMEs, corporate governance rating, municipal corporation, capital market
instrument, and financial institutions.

• 5.India Rating and Research Pt. Ltd:India Ratings is a wholly owned subsidiary of the Fitch Group. It
offers credit ratings for insurance companies, banks, corporate issuers, project finance, financial institutions,
finance and leasing companies, managed funds, and urban local bodies
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CONCLUSION
In the end I would like to say that these rating agencies provide
many investors with valuable insights which facilitates their
decision to further research and examine the opportunities and
risks attached to these investment securities. To understand
the quality of ratings given by these agencies, it is important to
know about the history and evolution of these agencies to get
an idea about the methodologies these agencies use. And
always try to keep a good credit rating score.
THANK YOU
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