Credit ratings assess a debtor's ability to repay loans and are determined by agencies like CRISIL in India, established in 1987. These ratings help maintain investor confidence, encourage disciplined borrowing, and provide benefits like improved corporate image and informed investment decisions. Various credit rating agencies operate in India, including ICRA, CARE, and SMERA, each serving different market segments and promoting transparency and trust in financial instruments.

1. CCRREEDDIITT RRAATTIINNGG

2. MMEEAANNIINNGG
Credit rating evaluates the debtor’s ability to pay back
the debt and the likelihood of default.
Credit ratings are determined by credit rating agencies.

3. DDEEFFIINNIITTIIOONN
According to CRISIL :
“Credit rating is an unbiased, objective
and independent opinion as to an issuer’s
capacity to meet financial obligation.”

4. OORRIIGGIINN
 The first mercantile credit agency was set up in newyork in
1841 to rate the ability of merchants to pay their financial
obligations.
 Later on, it was taken over by Robert Dun. This agency
published its first rating guide in 1859.
 The second agency was established by John Bradstreet in
1849 which was later merged with first agency to form Dun &
Bradstreet in 1933, which became the owner of Mood’s
investor’s service in 1962.

5. OORRGGIINN OOFF CCRREEDDIITT RRAATTIINNGG IINN
IINNDDIIAA
India’s first credit rating agency CRISIL was set up in 29
January 1987.
It is incorporated, promoted by the erstwhile ICICI Ltd
along with UTI and other financial institutions.
Mr. N Vaghul and Mr. Pradip Shah are CRISIL’S first
Chairman and Managing Director respectively.
The first private sector credit rating institution in India
was DUFFS & PHELPS CREDIT RATING INDIA
PVT.LTD formed in 1995.

6. N.Vaghul
Pradip Shah

7. NNEEEEDD FFOORR CCRREEDDIITT RRAATTIINNGG
 It is necessary in view of the growing number of cases of defaults in
payment of interest and repayment of principle sum borrowed by way of
fixed deposits, issue of debentures or preference shares or commercial
papers.
 Maintenance of investor’s confidence, since default shatter the confidence
of investors in corporate instruments.
 Protect the interest of investors who can not investigate much into the
merits of the debt instruments of a company.
 Motivate savers to invest in industry and trade.

8. OOBBJJEECCTTIIVVEESS OOFF CCRREEDDIITT
RRAATTIINNGG
Improves a healthy discipline on borrowers.
Lends greater credence to financial and other
representations.
Facilitates formulation of public guidelines on institutional
investments.
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
Act as a marketing tool.

9. IIMMPPOORRTTAANNCCEE OOFF CCRREEDDIITT RRAATTIINNGG
Credit ratings establish a link between risk and return.
They provide a yardstick against which to measure the risk
inherent in any instrument.
An investors uses the ratings to assess the risk level and
compares the offered rate of return with his expected rate of
return.
It is very uncommon for different classes of investors to
arrive at some uniform conclusion as to the relative quality of
the instrument.

10. BBEENNEEFFIITTSS
Benefits to Company
Improved Corporate Image
Good For Non Popular Companies
Act as a Marketing Tool
Reduced Cost of Borrowings
Easy To Raise Resource
Helps In Growth and Expansion

11. CCoonntt……
Benefits to Investors
Helps in investment decision.
Choice of instruments.
Easy understandability of investment proposal.
Dependable credibility of issuer.
Advantages of continuous monitoring.

12. CCrreeddiitt RRaattiinngg MMeetthhooddoollooggyy
 Business Analysis.
 Financial Analysis.
 Management Evaluation.
 Geographical Analysis.
 Regulatory & Competitive
Environment.
 Fundamental Analysis.

13. BBuussiinneessss AAnnaallyyssiiss..
Industry Risk.
Market Position.
Operating efficiency.
Legal position.
Size of business.

14. FFiinnaanncciiaall aannaallyyssiiss ..
Accounting quality.
Earning profitability.
Cash flow analysis.
Financial Flexibility.

15. MMaannaaggeemmeenntt EEvvaalluuaattiioonn..
The effects on company’s performance by:
Management goals
Plans and strategies.
Capacity to overcome unfavorable conditions.
Planning and controlling system.

16. GGeeooggrraapphhiiccaall AAnnaallyyssiiss..
Multinational Presence
Geographical advantages enjoyed by the
company.
Regional subsidies.

17. FFuunnddaammeennttaall AAnnaallyyssiiss..
Liquidity management
Asset quality
Profitability and financial position.
Interest and tax sensitivity.

18. RReegguullaattoorryy && CCoommppeettiittiivvee
EEnnvviirroonnmmeenntt
Structure of the Financial System.
Regulatory framework of the financial
system.

19. CCrreeddiitt RRaattiinngg aaggeenncciieess iinn IInnddiiaa
CRISIL Limited.
ICRA Limited.
Credit Analysis & Research Ltd. (CARE).
SME Rating Agency of India Ltd. (SMERA).
Fitch Rating India Ltd.

20. CCRRIISSIILL
Global analytical company providing ratings,
research, and risk and policy advisory services.
India’s leading ratings agency.
Provides high-end research to the world’s largest
banks and leading corporations.
Majority shareholder - Standard and Poor’s (S&P).
Caters to over 1,200 domestic and global clients,
through a range of research reports, analytical tools,
subscription products and customized solutions.

21. IICCRRAA
 ICRA Limited (formerly Investment Information and Credit Rating Agency
of India Limited) was set up in 1991 by leading financial/investment
institutions, commercial banks and financial services companies as an
independent and professional Investment Information and Credit Rating
Agency.
 Today, ICRA and its subsidiaries together form the ICRA Group of
Companies (Group ICRA). ICRA is a Public Limited Company, with its
shares listed on the Bombay Stock Exchange and the National Stock
Exchange.
 ICRA’s major shareholders IFCI (26%), and the balance by UTI, LIC, GIC,
PNB, Central Bank of India, Bank of Baroda, UCO Bank and banks (SBI)
.
 Alliance with Moody’s Investors Service.

22. CCAARREE
CARE is promoted by IDBI jointly with Financial Institutions,
Public/Private Sector Banks and Private Finance Companies
 It commenced its credit rating operations in October, 1993
and offers a wide range of products and Services in the field
of Credit Information and Equity Research.
It offers services like :
 Credit rating of debt instruments
 Advisory services like securitization of transactions,.
 Information services like providing information to
companies, industry and businesses.
 Equity research

23. FFiittcchh RRaattiinngg IInnddiiaa LLttdd..
 It is the latest entrant in the credit rating
business in the country as a joint venture
between the international credit Rating
agency Duff and Phelps and JM Financial
and Alliance Group.
In addition to debt instruments, it also
rates companies and countries on
request.

24. SSMMEERRAA RRaattiinnggss LLttdd..
Only rating agency dedicated to the SME segment offerin
g qualitative services at competitive prices.
Joint initiative of SIDBI, Dun & Bradstreet and 11 leading
banks operating in SME segment.
Launched on the 25th September 2005 by the Hon.
Finance Minister, Shri P Chidambaram.
Greater acceptability in banks (MOU with 22 leading
banks). 14 Banks offer interest rate and security
concessions for well rated SMERA customers.

25. DDeemmeerriittss ooff ccrreeddiitt rraattiinngg..