Published on March 9, 2014
CREDIT RATING AGENCIES IN INDIA Submitted byANSHUL SHARMA MBA-090101018
Financial System in India Financial System Financial Institutions FInancial Markets Regulatory Primary Fianancial Instruments Secondary Financial Services Factoring and Forfieting Wealth Management Merchant Banking Mutual Funds Investement Banking Leasing Hire Purchase Unorganized Derived Instruments Capital Markets Money Markets Derived Markets Non- Intermediary Systems Others Credit Rating Insurance Banking Non- Banking Custodial & Depository Services Risk Management Organized Market Supporting Systems : Trading, Broking, Settlement Equity Instruments Intermediary Debt Instruments Trading & Settlement Instruments Price Determination Process
Credit rating A credit rating assesses the credit worthiness of an individual, corporation, or even a country. A credit rating tells a lender or investor the probability of the subject being able to pay back a loan. A poor credit rating indicates a high risk of defaulting on a loan, and thus leads to high interest rates. Credit ratings are calculated from financial history and current assets and liabilities.
Functions of Credit rating agencies They provide training to the employees and executives of the companies for better management. They examine the risk involved in a new project, chalk out plans to fight with the problem successfully and thus ameliorate the percentage of risk to a great extent. They offer services to the mutual fund sector through the application of fund utilization services The major industries currently graded by the credit rating agencies include agriculture, health care industry, infrastructure, and maritime industry.
Credit rating agencies in india CRISIL (Credit rating information services of india limited ) ICRA (Investment information and credit rating agency of india) CARE (credit analysis and research limited) Fitch rating india pvt. Ltd. (earlier Duff&phelps credit rating india pvt. Ltd.) ONICRA credit rating agency of india ltd.
CRISIL The first credit agency setup on January 1, 1988, jointly started by ICICI and UTI with an equity capital of Rs. 4 crores, as public Ltd company. CRISIL is India's leading rating agency, and is the fourth largest in the world. With over a 60% share of the Indian Ratings market, CRISIL Ratings is the agency of choice for issuers and investors. CRISIL inspires trust and confidence the world over. It redefines industry standards constantly, and sets new benchmarks year after year. At the core of CRISIL's credibility, built up assiduously over the years, are its values: Integrity, Commitment, Innovation, Independence, and Analytical Rigour.
CRISIL's majority shareholder, Standard and Poor's, is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data.
CRISIL (Core businesses) Rating Global offshoring -irevna Research Capital markets Infrastructure Advisory Crisil risk solutions
ICRA 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. ICRA was set up by IFCI on 16th January 1991. It is a public limited company with an authorized share capital of Rs.10 crores, Rs. 5 crores is paid up. 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 (The international Credit Rating Agency Moody’s Investors Service1 is ICRA’s largest shareholder. The participation of Moody’s is supported by a Technical Services Agreement, which entails Moody’s providing certain high-value technical services to ICRA. )
Range of Services Rating Services Grading Services Consulting Services
Rating methodology Consists of four areas : Business analysis- covers an analysis of industry risk,market position in the country,operating efficiencyo f the company & legal position. Financial analysis - analysis of accounting quality, earnings protection, cashflow adequacy &financial flexibility. Management evaluation - studyof track recordof the management’s capacity to overcome adverse situations, goals,philosophy & strategies. Fundamental analysis – analysis of liquidity management, asset quality, profitability & interest & tax sensitivity.
Rating symbols High investment grades AAA & AA - Highest safety A - Adequate safety BBB - moderate safety Speculative grades BB - inadequate safety B - high risk C - substantial risk D - default