CREDIT RATING AGENCIES

Dr Puja Goyal
HSB, GJUS&T, Hisar
CREDIT RATING AGENCIES
 CRAevaluates an individual’s or a
company’s creditworthiness

Credit worthiness
 Ability to pay back
 Willingness to pay back
CREDIT RATING
 Analysisof possible credit risks associated
with granting a financial instrument
 Based on
✓Debtor’s income and credit lines
✓Credentials of company- Macro and Micro both
✓Statement of liabilities and assets
✓Income statement
✓Lending and borrowing transactions in the past
✓Willingness to pay
CREDIT RATING FRAMEWORK
BUSINESS RISK
 Industry Risk
 Market position
 Operating efficiency
MANAGEMENT RISK
 Competence
 Risk appetite
 Integrity
FINANCIAL RISK
 Accounting quality
 Financial
position
 Cash flow
CREDIT RATING AGENCIES
 EVALUATES companies, securities, state
governments, non profit organizations,
special purpose entities, countries
 CRA doesn’t provide any decision to
financial institutions
 It provides reports and inputs making it
easier to take an informed decision
CRAs IN INDIA
 CRISIL
 CARE
 ICRA
 FITCH
 IndiaRatings & Research Pvt Ltd
 Brickworks Ratings
 SMERA
 Infometrics
CRAs in INDIA
 Regulated by SEBI (Credit Rating
Agencies) Regulations, 1999
 RBI, for new Capital Adequacy
Framework, 2017- Bank Loan Ratings and
Basel II for Standardized approach