Credit Rating has become an important aspect when we talk of Finance these days; what are the major Credit rating agencies in India and other International companies in same business are mentioned here. The process followed by these companies are also touched upon this presentation

1. CREDIT RATING
PRESENTED BY:
Ashwani Kumar Singh A-22
Atin Govil A-23
Atish Bakhru A-24
Bibek Bhandary A-25
Chantelle Karen Mendonca A-26
Debleena Ghosh A-27
Deepak Malhan A-28
:

2. INTRODUCTION
 A credit rating is an evaluation of the credit worthiness of a debtor, especially a
business or a government, but not individual consumers
 The evaluation is made by a credit rating agency of the debtor's ability to pay back
the debt and the likelihood of default
 It is based on financial history and Current Assets and Liabilities
 Commercial Credit Risk is the largest and most elementary risk faced by many banks
including financial institutions and corporations
“Ratings are opinions on the relative capability of timely servicing
of corporate debt & obligations. These are not recommendations
to buy or sell. Neither the accuracy nor the completeness of the
information is guaranteed” -ICRA

3. The rating is based on whatever risk factors the rating
agency believes are relevant to the likelihood that
the issuer will honor the terms of a financial contract.
Credit ratings started in USA in the 19th century, when
early rating agencies began publishing financial
analyses on railroad companies.
Gradually they expanded their reach providing
investors an obligation ranging from corporate
debts to bank deposits.

4. TIME FRAME
Most of the items that can affect your credit rating remain on your credit reports
for seven years, the TransUnion credit bureau states.
Certain bankruptcies can be reported for ten years, and debts owed to the
government will stay on forever if they are never paid.
Items remaining on the report for a time frame is an advantage for people
with a good history because it shows they can maintain financial
responsibility for the long term. It is a disadvantage for those who might have
hit a temporary rough period.

5. Advantages of Credit Rating
 For the Financial System
 Reduces information asymmetry in the market by providing quality
credit information on debt instruments to all market players
 Facilitates pricing of debt instruments
 For Investors
 Facilitates comparative assessment of investment options, as ratings are
designed to be comparable across issuers in different businesses
 Complements investors' own credit analysis
 Facilitates asset monitoring, as ratings are kept under review until the
rated instrument is repaid
 For Issuers
 Provides independent credit information from a credible third party to
the community of potential investors
 Enhances issuer's access to investor funds
 Helps issuer differentiate itself in the market

6. DEMERITS OF CREDIT RATING
• In the absence of quality rating, credit rating is a curse for the
capital market industry, carrying out detailed analysis of the
company, should have no links with the company or the persons
interested in the company so that the reports impartial and
judicious recommendations for rating committee.
Biased Rating &
Misrepresentations
• Rating Company may conceal material information from the
investigating team of the credit rating company. Quality of
rating suffers and renders the rating unreliable.
Concealment Of
Material Information
• Finding off the investigation team, at times, may suffer with human
bias for unavoidable personal weakness of the staff and might
affect the rating
Human Bias

7. •Rating is done for a particular instrument to assess the credit risk but it should
not be construed as a certificate for the matching quality of the company or
its management.
Rating Is No Guarantee
For Soundness Of
Company
•Time factor affects’ rating, sometimes, misleading conclusions are derived.
Eg: A company in a particular industry might be temporarily in an adverse
condition but it is given a low rating.
Reflection Of
Temporary Adverse
Conditions
•Rating is done on the present and the past historic data of the company .
Prediction of the company’s health through rating is momentary and
anything can happen after assignment of rating symbols to the company.
Static Study
•Once a company has been rated and if it is not able to maintain its working
results and performance, credit rating agencies would review the grade and
down grade the rating resulting into impairiring the image of the company.
Down Grade

8. CREDIT SCORE
 It is not limited to banks.
 Your credit score is the compact, simplified version of your entire credit
history
 It is a mathematical analysis of your :
- debt
- payment history
- the existence of liens or other judgments
- public records
- other statistical data collected by the
credit bureaus.
“A credit score is a numerical expression based on a level analysis of a
person's credit files, to represent the creditworthiness of that person.”

9. USES OF A CREDIT SCORE
 Lenders, such as banks and credit card companies, use
credit scores to evaluate the potential risk posed by
lending money to consumers and to mitigate losses due
to bad debt.
 Lenders use it to determine who qualifies for a loan, at
what interest rate, and what credit limits.
 Helps determine which customers are likely to bring in
the most revenue.
 The use of credit or identity scoring prior to authorizing
access or granting credit is an implementation of
a trusted system.

10. WHY DO YOU NEED A GOOD CREDIT SCORE
• From helping you get a loan, insurance or to qualify you for a great
job
• Good credit simply makes life easier and less expensive
• Your credit score represents how responsible and even how ethical
you are.
 Example :
 1. Lenders look at your credit score to determine not only your
ability, but your willingness to repay a loan.
 2. Insurance companies view an individual with a good credit score
as someone who is trustworthy and less likely to commit insurance
fraud.
 3. Employers look at credit scores as a way to determine whether a
candidate will be a dependable new employee.

11. CREDIT SCORE RATINGS AND RANGES
 Three major credit agencies that provide consumer credit
information (including credit scores) are :
1. Equifax
2. Experian
3. TransUnion
 Credit score is a three-digit number that is calculated
by these credit agencies based on your credit history

12. Rating Process
 The process begins with issue of rating request letter by
the issuer of the instrument and signing of the rating
agreement.
 CRA assigns an analytical team consisting of two or
more analysts one of whom would be the lead analyst
and serve as the primary contact.
 Meeting with Management- The analytical team
obtains and analyses information relating to its financial
statements, cash flow projections and other relevant
information.
 Discussion with management on management
philosophy, competitive position, financial policies and
future plans.

13. Contd….
 Discussions on financial projections based on
objectives and growth plan , risks and opportunities.
 Rating committee- after meeting with the
management the analysts present their report to a
rating committee which then decides on the rating.
 After the committee has assigned the rating, the rating
decision is communicated to the issuer, with reasons or
rationale supporting the rating.
 Dissemination to the Public: Once the issuer accepts
the rating, the CRAs disseminate it, along with the
rationale, to the print media.

14. Rating Methodology
The rating methodology involves an analysis of
industry risk, issuer’s business and financial risk.
A rating is assigned after assessing all factors that
could affect the credit worthiness of the entity.
The industry analysis is done first followed by the
company analysis.

15. CRISIL’s Rating Process

16. CRISIL
 1st Rating Agency- Credit Rating Information Services of India Ltd.
Jointly promoted by ICICI and UTI in 1987
 It pioneered the concept of Credit Rating in the country and since
then introduced new concepts in Credit Rating services and has
diversified into related areas of information and advisory activities
 It became public in 1993
 In 1996 it formed a strategic alliance with S&P Rating Group

17. Services offered by CRISIL
CREDIT RATING SERVICES
CREDIBILITY FORST RATING
AND EVALUATION SERVICES
TRAINING
SERVICES
ADVISORY
SERVICES

18. THE BIG THREE
S&P and Moody's are based in the US, while Fitch is dual-headquartered in New York City &
London, and is controlled by the France-based FIMALAC. As of 2013 they hold a collective global
market share of "roughly 95 percent“ with Moody's and Standard & Poor's having approximately
40% each, and Fitch around 15%.
Their special status has been cemented by law — at first only in the United States, but then in
Europe as well."[From the mid-1990s until early 2003, the Big Three were the only “Nationally
Recognized Statistical Rating Organizations (NRSROs)" in the United States — a designation
meaning they were used by the US government in several regulatory areas. (Four other NRSROs
merged with Fitch in the 1990s.)

21. Credit Rating Agencies In India
 CIBIL headquartered at Mumbai is an Credit Information Company
which maintains records of an individual‘s payments related to
credit cards and loans. The information about users credit cards and
loans is later used by the CBIL to generate Credit information reports
which are used to approve loan applications.
 Fitch Ratings, a Fitch Group company is a among the top credit
rating agencies in India incorporated in 1913 in New York, USA. Fitch
Ratings provides financial information services in more than 30
countries and has over 2000 employees working at 50+ offices
worldwide.
 ICRA limited is a joint venture between Moody’s Investors and
various financial services companies is a part of ICRA group which
was founded in 1991. It is a Credit rating agency listed on the
National Stock Exchange and Bombay Stock Exchange.
 Onicra Credit Rating Agency is a Credit and Performance Rating
company based in Gurgaon and founded in 1993. Onicra is among
the top 10 credit rating agencies in India offering smart and
innovative solutions like risk assessment, analytical solutions and
ratings to MSMEs, corporate and individuals.
CIBIL
FITCH
RATING
GROUP
ICRA
ONICRA

22. Risk Analysis
Business Risk
Industry Risk
New Project Risk
Financial Risk
Ratios

23. Risk Analysis
Business Risk
Industry Risk
New Project Risk
Financial Risk
Ratios

24. Risk Analysis
Business Risk
Industry Risk
New Project Risk
Financial Risk
Ratios

25. Risk Analysis
Business Risk
Industry Risk
New Project Risk
Financial Risk
Ratios

26. CREDIT RATING SYMBOLS
 CRISIL AAA(Highest Safety)Instruments with this rating are considered to have the highest degree
of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit
risk.
 CRISIL AA(High Safety)Instruments with this rating are considered to have high degree of safety
regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
 CRISIL A(Adequate Safety)Instruments with this rating are considered to have adequate degree
of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
 CRISIL BBB(Moderate Safety)Instruments with this rating are considered to have moderate
degree of safety regarding timely servicing of financial obligations. Such instruments carry
moderate credit risk.
 CRISIL BB(Moderate Risk)Instruments with this rating are considered to have moderate risk of
default regarding timely servicing of financial obligations.
 CRISIL B(High Risk)Instruments with this rating are considered to have high risk of default regarding
timely servicing of financial obligations.
 CRISIL C(Very High Risk)Instruments with this rating are considered to have very high risk of default
regarding timely servicing of financial obligations.
 CRISIL D(Default)Instruments with this rating are in default or are expected to be in default soon.

27. Credit Rating of Indian Banks By S&P
 Standard & Poor's Ratings Services (S&P) affirmed its 'BBB-' long-term
and 'A-3' short-term issuer credit ratings on Axis Bank. The outlook on
the long-term rating is negative.
 Standard & Poor's (S&P) Ratings Services today assigned 'BBB-' rating
to a proposed issue of senior unsecured notes by HDFC Bank (BBB-
/Negative/A-3). The rating on the notes reflects the long-term issuer
credit rating on the bank.
 Global ratings firm Standard & Poor's (S&P) downgraded IDBI
Bank on its foreign currency issuer credit rating on the back of weak
asset quality of the bank. Lowered foreign currency issuer credit
rating on India-based IDBI Bank to 'BB+/B' from 'BBB-/A-3'. The
outlook on the long-term rating is negative
 Standard & Poor's Ratings Services rates Senior Debt & Deposit
Ratings of ICICI Bank Limited as BBB- for Long term and A-3 for Short
term.
AXIS BANK
HDFC BANK
IDBI BANK
ICICI BANK

29. THANK YOU