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CRISIL Rating

CRISIL Credit Rating Overview

Last Updated 19th May 2022

CRISIL is India’s first credit rating agency that provides credit ratings to debt instruments and institutions based on parameters such as the business strengths, its market share and portfolio performance.

CRISIL Full Form Credit Rating Information Services of India Limited
CRISIL Instruments Debt instruments and financial entities
Crisil Rating Parameters Business strengths, Market share and reputation
CRISIL Highest Rating Scale CRISIL AAA
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    What is CRISIL Rating?

    CRISIL rating is the quantified credit rating issued to every debt instrument and financial entity by CRISIL. CRISIL stands for Credit Rating Information Services of India Limited. It is India’s first credit rating agency which was pioneered in 1937 in India to serve various stakeholders such as banks, NBFCs, lenders, investors, issuers, market intermediaries PSUs, financial institutions, state governments, urban local bodies, mutual funds and manufacturing companies.

    Who does the CRISIL rating cater to?

    CRISIL provides quantified ratings to the entire gamut of debt instruments and financial institutions to determine creditworthiness based on parameters such as business strengths, market share and reputation. These credit ratings help the borrowers and investors to access or invest the funds with credible financiers. Below mentioned is a list of few instruments which are provided rating by the CRISIL.

    Debt instruments Financial institutions
    Loans Manufacturing companies
    Commercial papers NBFCs
    Non-convertible debentures PSUs
    Bonds State governments
    Mortgage-backed securities Mutual funds

    CRISIL Rating Scales: CRISIL provides credit ratings to debt instruments and financial institutions under seven categories.

    1. Long-term instruments: For long-term instruments such as bonds, debentures and loans with a maturity period exceeding one-year CRISIL credit ratings are assigned from ‘CRISIL AAA’ to ‘CRISIL D. ’CRISIL AAA credit rating is assigned to the debt instruments which have the highest safety.

    Rating Meaning
    CRISIL AAA Highest safety
    CRISIL AA A high degree of safety
    CRISIL A An adequate degree of safety
    CRISIL BBB A moderate degree of safety
    CRISIL BB A moderate risk of default
    CRISIL B High risk of default
    CRISIL C Very high risk of default
    CRISIL D Instruments in default

    2. Short-term instruments: Short-term debt instruments include commercial paper, short-term debentures and loans within a maturity period of one year etc. CRISIL credit ratings are assigned from ‘CRISIL A1 to ‘CRISIL D’.

    Rating Meaning
    CRISIL A1 Very Strong degree of safety
    CRISIL A2 Strong degree of safety
    CRISIL A3 Moderate degree of safety
    CRISIL A4 Minimal degree of safety
    CRISIL D In default

    3. Dual Ratings: Debt instruments which have an original maturity of more than one year but also have an option of put option exercisable within one year from the date of issue are assigned credit rating on both long term and short-term scale. Dual rating would be as follows CRISIL AA+/ CRISIL A1+.

    4. Structured Obligations: CRISIL credit ratings assigned to structured finance instruments vary based on long-term and short-term scales. Long-term structured instruments have a maturity period exceeding one year, and short-term structured instruments mature within one year. The credit ratings range from ‘CRISIL AAA (SO)’ to ‘CRISIL D (SO)’ for the long-term instruments and ‘CRISIL A1 (SO)’ to ‘CRISIL D (SO)’ on the short-term instruments.

    5. Credit Enhancement Ratings: Debt instruments that are backed by credit enhancement of third parties are assigned credit ratings under this category based on the maturity period. The credit ratings range from ‘CRISIL AAA (CE)’ to ‘CRISIL D (CE)’ on the long-term scale and ‘CRISIL A1 (CE)’ to ‘CRISIL D (CE)’ on the short-term rating scale as in long-term and short-term debt instruments.

    6. Fixed deposits: FAAA is the highest credit rating provided for the fixed deposits indicating that the financier has the lowest risk of turning into default.

    Rating Meaning
    FAAA Highest safety
    FAA High safety
    FA Adequate safety
    FB Inadequate safety
    FC High risk
    FD Default
    NM Not Meaningful

    7. Corporate Credit Rating: CRISIL assigns credit ratings to companies based on the company strength and how it handles debt obligations.

    Rating Meaning
    CCR AAA Highest degree of strength
    CCR AA High degree of strength
    CCR A Adequate degree of strength
    CCR BBB Moderate degree of strength
    CCR BB Inadequate degree of strength
    CCR B High risk
    CCR C Substantial risk
    CCR D In default
    CCR SD Specific Default

    Credit Rating Scales for specific Debt Instruments

    • CRISIL Mutual Fund Rating: CRISIL mutual fund ranking is based on parameters such as risk-adjusted returns, asset concentration, liquidity and asset quality. It helps the investors to know about the average of daily returns on the net asset value in the defined time period. The investor can also know about the risk of default of the issuer of the mutual funds. Overall, the credit ratings provided to the mutual funds help the investors to invest their funds smartly. CRISIL ranking scales used by the CRISIL Company ranges from 1 to 5. The top 10 percentile of funds is ranked as CRISIL Fund Rank 1 indicating ‘very good performance’ of mutual funds.
    • CRISIL ULIP Rating: CRISIL ULIP (Unit Linked Insurance Plans) ratings provided by CRISIL company benchmarks various ULIP to facilitate investors in evaluating plans and decision making. Unit linked Insurance plans are insurance plans which integrate the insurance and investments under the single-integrated plan. The CRISIL ULIP ratings, provided to Unit linked insurance plans are based on two factors- cost and portfolio performance. While the cost factor focuses its attention on the costs and charges while offering the product, the portfolio performance is evaluated using the returns on the investments in the past 5 years.

    What is the role of CRISIL ratings?

    CRISIL ratings help the investors and borrowers to make smarter financial decisions by analysing the creditworthiness of debt instruments and financial instruments.

    Role of CRISIL ratings for issuers and borrowers: Borrowers and issuers can use the CRISIL ratings to ease their access to various alternative options and also optimise the cost of funds of different debt instruments of the financial institutions.

    How do CRISIL Rating affect Depositors?

    CRISIL credit ratings provided by CRISIL assess the creditworthiness of any financial institution. Before making any decision about investment in any institutions, you can make an internal evaluation of various institutions. For instance, if you have decided to invest in fixed deposits, the criteria to choose about the lending institution would be a higher rate of interest along with the attractive returns. However, these investment instruments are subject to market risks and not backed by the government. It is thus essential that the creditworthiness or CRISIL rating of the instruments and financial institutions is determined before making any decision. Also, you can know about the attractive offers of the different players in the market using these credit ratings.

    FAQs

    What does CRISIL rating mean?

    CRISIL ratings provided by global agency CRISIL represents the creditworthiness of debt instruments and financial institutions. These credit ratings help the borrowers and investors to access the right financier which has the least credit risk of turning into default.

    How does CRISIL rate a company?

    CRISIL ranking is calculated based on the degree of strength of the company concerning honouring debt obligations. The ratings are based on parameters such as the business strengths, its market share and portfolio performance. A 'CCR AAA' indicates the highest strength of a company with the lowest risk of turning to defaults.

    What does the FAAA rating mean?

    FAAA in CRISIL rating means that the fixed deposits are of the highest safety and there is the lowest risk of default.

    Is Crisil Rating reliable?

    Yes, these ratings are provided by the credible global analytical agency, Credit Rating Information Services of India Limited by analysing various debt instruments and financial institutions.

    How do I find my CRISIL rating?

    You can find the CRISIL rating of any debt instrument or financial instrument on the official website of CRISIL.


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