WHAT are the criteria for rating a debt instrument?

Are they confidential and known only to the issuer of the instrument and the rating agency? Crisil, the leading credit rating agency, says its criteria and rating methodologies are totally transparent. The agency has just come out with a four part series on rating criteria and the methodologies adopted by it for different sectors. According to Ms Roopa Kudva, Chief Rating Officer, Crisil is the first agency in the country to publish such an extensive series on rating criteria and is part of its efforts to improve transparency and disclosure pertaining to the rating process. Crisil uses eight key financial ratios to assess the health of a company. These ratios have been chosen based on an in-depth study using Crisil's database, which showed a strong co-relation of these ratios and corporate defaults, Ms Kudva said. Median values of these key ratios are used by Crisil as part of its quantitative assessment of financial risk profile of a company. Talking to press persons on rating criteria here , Ms Kudva said Crisil's ratings have shown an 87.6 per cent non-default rating stability in 2002. While the stability of `AAA' ratings in 2002 was comparable to its historical one-year average, stability of `AA" rating improved substantially. Ms Kudva said Crisil's "AAA" ratings are more stable than that of "AAA" rating of Standard and Poor's, leading international rating agency and an equity partner of Crisil.