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Course Code:19BFS507A Investment Banking and Financial Services
Course Code:19BFS507A Investment Banking and Financial Services
Financial institutions
Course Leader:
Ms. Reshma K.J
reshma.ms.mc@msruas.ac.in
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Faculty of Management and Commerce © Ramaiah University of Applied Sciences
Session Objectives
At the end of Session Students will be able to :
Discuss the concept of Credit Rating Agencies
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Credit Rating
• It is the opinion of the rating agency on the relative ability and willingness of the issuer of
the debt instrument to meet the debt obligations as and when they arise
• For the investor it is an indicator expressing the underlying credit quality of issue programme
• In India there are three major credit rating agencies namely
• CRISIL [Credit Rating Information Services if India limited.]
• ICRA [Investment information and credit rating agency of India limited]
• CARE [Credit Analysis and Research in Equities.]
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Faculty
FacultyofofManagement
Managementandand
Commerce
Commerce ©. Ramaiah
©. Ramaiah University
UniversityofofApplied
AppliedSciences
Sciences
Credit Rating
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Credit Rating (Contd..)
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
What is Credit Rating?
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
What Credit Rating is not ?
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Credit Rating Agency
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Credit Rating Symbol
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Credit Rating Symbol (Contd..)
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Symbols for Long Term
Terminology CRISIL ICRA Rating CARE Rating
Rating
Highest AAA LAAA Case AAA
High AA LAA Case AA
Adequate A LA Case A
Moderate BBB LBBB Case BBB
Inadequate BB LBB Case BB
Risky B LB-Risky Case B-Risky
LC-Substantial Risk Case C-High Risk
LD-Expected to Default Case D-Likely to Default
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Faculty of Management and Commerce ©. Ramaiah University of Applied Sciences
Symbols for Medium Term
Terminology CRISIL Rating ICRA Rating CARE Rating
Highest FAAA MAAA Case AAA
High FAA MAA Case AA
Adequate FA MA Case A
Inadequate FBB MB Case BBB
Risk Prove FB MC Case BB
Default FD MD Case B-Risky
Expected Case C-High Risk
Case D-Likely to Default
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Faculty of Management and Commerce ©. Ramaiah University of Applied Sciences
Symbols for Short Term
• CRISIL : P1 to P5
• ICRA : A1 to A5
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Credit Rating Procedure
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Collection of data
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Notification of Rating Discussion to the Issuer
Acceptance
Formal Notification
Surveillance
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Benefits of Credit Rating
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Credit Rating Agencies in India
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
ORIGIN OF THE CONCEPT OF CREDIT RATING
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
CREDIT RATING AGENCIES IN INDIA
• CRISIL is the market leader in the credit rating industry with 70 per
cent market share
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Limitations of Credit rating India
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences
Summary (Contd..)
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Faculty of Management and Commerce ©Ramaiah University of Applied Sciences