A credit rating agency rates the creditworthiness of issuers of debt and their ability to pay back debt. The major credit rating agencies are S&P, Moody's, and Fitch. They rate instruments like bonds, CDs, and securities issued by governments, corporations, and other entities. High credit ratings lead to lower interest rates for issuers. In India, major credit rating agencies are CRISIL, ICRA, CARE, and FITCH which provide rating services, information services, and advisory services. They rate debt instruments, structured finance products, and companies in India.

1. Made By :
Saksham Pandit
(73)

2.  A credit rating agency is a company that assigns credit ratings, which rate a
debtor's ability to pay back debt by making timely interest payments and
the likelihood of default.
 An agency may rate the creditworthiness of issuers of debt obligations, of
debt instruments, and in some cases, of the servicers of the underlying
debt, but not of individual consumers.
 The debt instruments rated by CRAs include government bonds, corporate
bonds, CDs, municipal bonds, preferred stock, and collateralized securities,
such as mortgage-backed securities and collateralized debt obligations.
 The issuers of the obligations or securities may be companies, special
purpose entities, state or local governments, non-profit organizations, or
sovereign nations.
 A credit rating facilitates the trading of securities on a secondary market. It
affects the interest rate that a security pays out, with higher ratings leading
to lower interest rates.
 Individual consumers are rated for creditworthiness not by credit rating
agencies but by credit bureaus which issue credit scores.

3. What is a credit rating?
A credit rating represents the
rating agency's opinion on the
likelihood of a rated debt
obligation being repaid in full
and on time.
A simple alphanumeric symbol
is normally used to convey a
credit rating.

4.  When the United States began to expand to the west,
trading distances increased, Business owners' hesitation to
extend credit to new customers led to the birth of the credit
reporting industry.
 Mercantile credit agencies—the precursors of today's rating
agencies—were established in the wake of the financial
crisis of 1837. The first such agency was established in
1841 by Lewis Tappan in New York City.
 Credit rating agencies originated in the United States in the
early 1900s, when ratings began to be applied to securities,
specifically those related to the railroad bond market.
 Following the 1907 financial crisis, demand rose for such
independent market information, in particular for
independent analyses of bond creditworthiness. In 1909,
financial analyst John Moody issued a publication focused
solely on railroad bonds. His ratings became the first to be
published widely in an accessible format and his company
was the first to charge subscription fees to investors.

5.  In the next few years, antecedents of the "Big Three" credit rating agencies were
established. Poor's Publishing Company began issuing ratings in 1916, Standard
Statistics Company in 1922 and the Fitch Publishing Company in 1924.
 International "sovereign bond" rating shrivelled during the Great Depression to a
handful of the most creditworthy countries, after a number of defaults of bonds
issued by governments such as Germany's.
 In the late 1960s and 1970s, ratings were extended to commercial paper and bank
deposits.
 The rating agencies added levels of gradation to their rating systems.
 The end of the Bretton Woods system in 1971 led to the liberalization of financial
regulations and the global expansion of capital markets in the 1970s and 1980s.
 Two economic trends of the 1980s and 90s that brought significant expansion for the
global capital market were -
• the move away from "intermediated" financing (bank loans) toward cheaper and
longer-term "disintermediated" financing (tradable bonds and other fixed income
securities) and
• the global move away from state intervention and state-led industrial adjustment
toward economic liberalism based on (among other things) global capital markets
and arms-length relations between government and industry.

6. Benefits to investors:
Safety of investments.
Recognition of risk and
returns.
Freedom of investment
decisions.
Wider choice of
investments
Dependable credibility of
Benefit to company:
Easier to raise funding
Reduced cost of
borrowing
Reduce cost of public
issues
Ratings can build up
image
Ratings facilitates growth
Recognition to unknown
companies

7. • The information collected
by the rating agency may
be subject to personal bias
of the rating team.
• Chances of Improper
Disclosure
• Rating is done based on
present and past data of
the company
• Problems for new
companies to collect funds
from the market.
• Different ratings are
provided by various rating
agencies for the same

8. Poor
Headquarter – New York, US
President – Neeraj Sahai
S&P 500 - USA
S&P/TSX – CANADA
S&P/ASX 200 – AUSTRALIA
CRISIL - INDIA

9. It is one of several
CRAs that have been
designated
a nationally
recognized statistical
rating organization by
the U.S. Securities and
Exchange
Commission.
CGS and GAMMA scores
S&P has developed criteria and
methodology for assessing corporate
governance since 1998 and has been
actively assessing companies'
corporate-governance practices since
2000.
GAMMA methodology
components :
Shareholder influence
Shareholder rights
Transparency, audit,
enterprise risk management
Board effectiveness,
strategic process and
incentives
S & P Issues :
1. Downgrading U.S. & France
2. The triple AAA rating to
CDO’s which were actually
junk
3. Forcing European firms to
pay for their licenses
4. “Pay to play" model makes
their ratings meaningless

10. Headquarter – New
York, U.S.
CEO – Raymond
McDaniel

11.  Moody’s updated its approach for estimating default correlation of
non-prime/non traditional mortgages involved in structured financial
products like Mortgage-backed securities and Collateralized debt
obligations.
On July 10, 2007, in "an unprecedented move", Moody's downgraded
399 subprime mortgage-backed securities that had been issued the year
before. Three months later, it downgraded another 2506 tranches ($33.4
billion). By the end of the crisis, Moody's downgraded 83% of all the 2006
Aaa mortgage backed security tranches and all of the Baa tranches.
According to the Financial Crisis
Inquiry Report, 73% of the
mortgage-backed securities
Moody's had rated triple-A in 2006
were downgraded to junk by 2010.
In its "Conclusions on Chapter 8",
the Financial Crisis Inquiry
Commission stated: "There was a
clear failure of corporate
governance at Moody’s, which did
not ensure the quality of its ratings
on tens of thousands of mortgage-
backed securities and CDOs

12. Headquarter – New York, U.S. &
London, UK
President – Paul Taylor

13. Fitch Ratings is the smallest
of the "big three" NRSROs,
covering a more limited share
of the market than S&P and
Moody's, though it has grown
with acquisitions and
frequently positions itself as
a "tie-breaker" when the other
two agencies have ratings
similar, but not equal, in
scale.
Fitch Group
announced the
sale of
Algorithmics (risk
analytics
software) to IBM
for $387 million.
FITCH SOLUTIONS
Launched in 2008, Fitch
Solutions offers a range
of fixed-income products
and professional
development services for
financial professionals.
The firm also distributes
Fitch Ratings' proprietary
credit ratings, research,
financial data, and
analytical tools.
FITCH LEARNING
Fitch Learning is a financial services training
and development firm. Previously named
7city Learning, it was acquired by Fitch
Group in January 2013. 7city Learning
merged with Fitch's existing training
business to form Fitch Learning. The
company offers professional certifications,
tailored training and short courses to a
range of financial institutions and
individuals.

16. CRISIL(Credit Rating Information Services
of India Ltd)
ICRA(Information and Credit Rating
Services ltd)
CARE (Credit Analysis and Research Ltd)
FITCH India

17. A Credit rating agency can
be promoted by:
a) a public financial
institution
b) a scheduled
commercial bank
c) a foreign bank
operating in India
with the approval of
the Reserve Bank of
India
d) a foreign credit rating
agency having at
least five years
experience in rating
securities
e) any company or a
body corporate,
having net worth of
minimum 100crores
rupees.
AS PER SEBI(CREDIT
RATING AGENCIES)
REGULATIONS, 1999
A. the applicant is set up
and registered as a
company under the
Companies Act, 2013
B. the applicant has, in
its Memorandum of
Association, specified
rating activity as one
of its main objects
C. the applicant has a
minimum net worth of
rupees five crores.

18. A CRA shall have in place a rating process that reflects consistent and
international rating standards.
A CRA shall make all efforts to protect the interests of investors.
A CRA shall at all times exercise due diligence, ensure proper care and
exercise independent professional judgment.
A CRA shall disclose its rating methodology to clients, users and the
public.

19. •The CRA should
enter into a
written
agreement with
each client
containing ,
oRights and
liabilities of each
party w.r.t rating
of securities.
Fee charged
A periodic review of the
rating during the tenure
Clients agreement to
cooperate and provide
true, adequate and
timely information.
Disclosure by CRA to
client regarding the
rating assigned.
Clients
agreement to
disclose the
rating assigned in
the offer
document for the
last 3 years

20. The first rating
agency ‘Credit
Rating Information
Services of India Ltd.
, CRISIL, was
promoted jointly in
1987 jointly by the
ICICI and the UTI.
Other shareholders
included ADB, LIC,
HDFC Ltd, General
Insurance
Corporation of India
and several other
foreign and Indian
Banks.
The principle function of CRISIL is to rate
mandated debt obligations of Indian Companies
chit fund, real estate developers, LPG Kerosene
dealers, NBFC, Indian states and so on.
Rating of DEBT
OBLIGATIONS
•Debt obligation includes rupee denominated credit
instruments like debentures, preference shares,
deposits, CD’s commercial papers and a structured
obligations of manufacturing ,finance companies,
banks, financial institutions etc.
•It ensures stable and healthy growth of capital
market by offering credit rating which is widely
acceptable. It provides increased disclosures, better
accounting standards and improved financial
information to the users.
•It reduces cost of issue by direct mobilization of
resources.
•It protects the interest of investors by constantly
monitoring the results of rated companies.

21. Rating of STRUCTURED
OBLIGATIONS
It reflects CRISIL opinion regarding the
capacity and willingness of the company to
make timely payments of financial
obligations on rated instruments.
Rating of REAL ESTATE
DEVELOPERS
•CRISIL has developed framework
for rating of real estate projects.
Such rating helps investors to
identify their investment options
•The rating is expected to help
developers mobilize funds for their
projects.
•The methodology assesses a
project in terms of project risk
factors and developer’s risk factors.
BOND FUND
RATING
The rating is an
opinion of the quality
of bond funds
underlying portfolio
holdings. They mainly
focus on fixed income
securities.
The rating
methodology takes
into account the
following factors i.e.,
credit associated with
the securities, the
systems and
procedures followed
by the funds and
management quality
and expertise.

22. BANK LOAN RATING
•The creditworthiness of bank’s borrower is assessed offering comments on the
likelihood of repayment of loans.
•The methodology considers the borrowers underlying assets liquidity and risk
management initiative and for NBFC quality of assets , loans and investment.
CAPITAL MARKET GROUP
This group provides customized research and advisory assistance to meet specific
transactional and strategic requirements of clients. It offers services like diagnostic
evaluation for valuation of Indian partner of a foreign asset management company,
technical assistance to AMFI, portfolio evaluation and portfolio analysis for leading
mutual funds, composite performance ranking of domestic mutual funds, assistance to
government for the development of India’s financial sector.

23. Energy group
services:
Include aspects like sector reforms
and structuring, regulatory framework
privatization, corporate plan fuel
related services. Transaction level
assignment include project scoping
and structuring, bid process
management, financial viability
analysis of projects, risk identification
and analysis and structuring of project
contacts, security package, structuring
and analysis.
TRANSPORT & URBAN INFRASTRUCUTRE
GROUP SERVICES
•Policy level assignments include advice on transport sector privatization policy of state
ports, development of risk identification allocation, long term sector plans and state role.
•Transaction level assignments include financial viability analysis, project structuring,
bid process management, negotiation of terms with successful bidders
•Privatization and disinvestment group: this group renders advisory services to central
state governments, public sector enterprises and private sector entities interested in
participating in privatization program, these services cover 3 aspects policy level,
enterprise level and reforms and restructuring.
BANKING &
FINANCE GROUP
services covering restructuring and
business reengineering, credit
management, investment
management and portfolio
insurance, equity valuation,
resource mobilization studies and
financial feasibility studies

24. •Information and Credit Rating Services (ICRA) has been promoted
by IFCI Ltd as the main promoter and started operations in 1991.
•Other shareholders are UTI, Banks, LIC, GIC, Exim Bank, HDFC and
ILFS.
•It provides Rating, Information and Advisory services ranging from
strategic consulting to risk management and regulatory practice.
•The main objectives of ICRA are to assist investors both individual
and institutional in making well informed decisions
•To assist issuers in raising funds from a wider investor base.
•To enable banks, investment bankers, Brokers in placing debt with
investors.
•To provide regulators with market driven systems to encourage the
healthy growth of capital markets.
•It provides rating services, information services and advisory
services.

25. RATING SERVICES
I. ICRA rates debt instruments issued by
manufacturing companies, commercial banks,
NBFCs, financial institutions, PSUs and
municipalities.
II. The instruments rated by it include bonds/
debentures, fixed deposits commercial papers and
certificate of deposit. It also rates structured
obligations in accordance with the terms of the
structure based on risk assessment of the
instrument . It rates sector specific debt
obligations issued by power, telecom and
infrastructure companies.
III. It also provides corporate governance rating ,
rating of claims paying ability of insurance
companies, credit assessment of large medium
and small scale companies to obtain assistance
from banks, FIs. It also provides services of
general assessment of companies.

26. INFORMATION
SERVICES
The information services division of ICRA
focuses on providing authentic data and
value added products used by
intermediaries, financial institutions, banks,
asset managers, institutions and investors.
Value added services include equity
grading providing a critical input on a
company's earning prospects and inherent
risks in decision making process of equity
investors and equity assessment.
Other services include corporate reports,
equity assessment, mandate based studies
(customized research) and sector/industry
specific publication
SERVICES
i. The advisory services
division of ICRA offers wide
ranging management
advisory services. Under
advisory services ICRA
provides its understanding on
the business processes and
relevant organizational issues
to different players of
financial markets such as
investors, issuers, regulators,
intermediaries and media.
ii. The advisory services include
1.strategic consulting/
strategic practice 2. risk
management (credit risk,
market risk and operations
risk) 3. regulatory practice 4
transaction practice 5.
information( content
services).
iii. It focuses on sectors like
banking and financial
services, infrastructure

27. Credit Analysis and Research Ltd or 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 also provides advisory services in the areas of
securitization of transactions and structuring
Financial Instruments.
It offers services like
1. Credit rating of debt instruments
2. Advisory services like securitization
transactions, structuring financial instruments,
financing infrastructure projects and municipal
finances
3. Information services like providing information
to companies, industry and businesses.
4. Equity research
•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.