Home » News » Personal Finance»Fixed Income
Jan 23, 2012, 02.49 PM | Source: Moneycontrol.com

Credit Ratings of Debt instruments

Rating organisations evaluate the credit worthiness of an issuer with respect to debt instruments or its general ability to pay back debt over the specified period of time. The rating is given as an alphanumeric code that represents a graded structure or creditworthiness. Credit Ratings of Debt instruments

Credit Ratings of Debt instruments
What is a credit rating?

Rating organisations evaluate the credit worthiness of an issuer with respect to debt instruments or its general ability to pay back debt over the specified period of time. The rating is given as an alphanumeric code that represents a graded structure or creditworthiness.

Credit Ratings of Debt instruments

Below are the details of credit ratings attached to Debt securities by various credit rating agencies.

CRISIL Credit Rating scale for Long-Term Instruments

 

 

Symbols Rating Definition
CRISIL AAA (Highest Safety)
Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
CRISIL AA (High Safety)
Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
CRISIL A (Adequate Safety)
Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk
CRISIL BBB (Moderate Safety)
Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
CRISIL BB (Moderate Risk)
Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.
CRISIL B (High Risk)
Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
CRISIL C (Very High Risk)
Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
CRISIL D Default
Instruments with this rating are in default or are expected to be in default soon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

1) CRISIL may apply '+' (plus) or '-' (minus) signs for ratings from 'CRISIL AA' to 'CRISIL C' to reflect comparative standing within the category.

2) CRISIL may assign rating outlooks for ratings from 'CRISIL AAA' to 'CRISIL B'. Ratings on Rating Watch will not carry outlooks. A rating outlook indicates the direction in which a rating may move over a medium-term horizon of one to two years. A rating outlook can be 'Positive', 'Stable', or 'Negative'. A 'Positive' or 'Negative' rating outlook is not necessarily a precursor of a rating change.

3) A suffix of 'r' indicates investments carrying non-credit risk.

The 'r' suffix indicates that payments on the rated instrument have significant risks other than credit risk. The terms of the instrument specify that the payments to investors will not be fixed, and could be linked to one or more external variables such as commodity prices, equity indices, or foreign exchange rates. This could result in variability in payments, including possible material loss of principal, because of adverse movement in value of the external variables. The risk of such adverse movement in price/value is not addressed by the rating.

4) CRISIL may assign a rating of 'NM' (Not Meaningful) to instruments that have factors present in them, which render the outstanding rating meaningless. These include reorganisation or liquidation of the issuer, the obligation being under dispute in a court of law or before a statutory authority.

5) A prefix of 'PP-MLD' indicates that the instrument is a principal-protected market-linked debenture. The terms of such instruments indicate that while the issuer promises to pay back the face value/principal of the instrument, the coupon rates of these instruments will not be fixed, and could be linked to one or more external variables such as commodity prices, equity share prices, indices, or foreign exchange rates.

 

CRISIL Credit Rating scale for Fixed Deposits

Symbols Rating Definition
FAAA ("F Triple A") (Highest Safety)
This rating indicates that the degree of safety regarding timely payment of interest and principal is very strong.
FAA ("F Double A") (High Safety)
This rating indicates that the degree of safety regarding timely payment of interest and principal is strong. However, the relative degree of safety is not as high as for fixed deposits with 'FAAA' ratings.
FA  (Adequate Safety)
This rating indicates that the degree of safety regarding timely payment of interest and principal is satisfactory. Changes in circumstances can affect such issues more than those in the higher rated categories.
FB (Inadequate Safety)
This rating indicates inadequate safety of timely payment of interest and principal. Such issues are less susceptible to default than fixed deposits rated below this category, but the uncertainties that the issuer faces could lead to inadequate capacity to make timely interest and principal payments.
FC (High Risk)
This rating indicates that the degree of safety regarding timely payment of interest and principal is doubtful. Such issues have factors present that make them vulnerable to default; adverse business or economic conditions would lead to lack of ability or willingness to pay interest or principal.
FD (Default)
This rating indicates that the fixed deposits are either in default or are expected to be in default upon maturity.
NM (Not Meaningful)
Instruments rated 'NM' have factors present in them, which render the outstanding rating meaningless. These include reorganisation or liquidation of the issuer, and the obligation being under dispute in a court of law or before a statutory authority.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

1) CRISIL may apply '+' (plus) or '-' (minus) signs for ratings from FAA to FC to indicate the relative position within the rating category.

2) CRISIL may assign rating outlooks for the ratings from 'FAAA' to 'FB'. Ratings on Rating Watch will not carry outlooks. A rating outlook indicates the direction in which a rating may move over a medium-term horizon of one to two years. A rating outlook can be 'Positive', 'Stable', or 'Negative'. A 'Positive' or 'Negative' rating outlook is not necessarily a precursor of a rating change.

3) The contents within parenthesis are a guide to the pronunciation of the rating symbols.

 

CARE Rating of Debt instruments – Long / Medium-term Instruments (NCD/FD/CD/SO/CPS/RPS/L)

 

Symbols Rating Definition
CARE AAA Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
CARE AA Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
CARE A Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
CARE BBB Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
CARE BB Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.
CARE B Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
CARE C Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
CARE D Instruments with this rating are in default or are expected to be in default soon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories CARE AA to CARE C. The modifiers reflect the comparative standing within the category.

 

ICRA’s Long-Term Rating Scale

Long-Term rating Scale: All Bonds, NCDs, and other debt instruments (excluding Public Deposits) with original maturity exceeding one year.

 

Symbols Rating Definition
LAAA / AAA The highest-credit-quality rating assigned by ICRA. The rated instrument carries the lowest credit risk
LAA / AA The high-credit-quality rating assigned by ICRA. The rated instrument carries low credit risk.
LA / A The adequate-credit-quality rating assigned by ICRA. The rated instrument carries average credit risk.
LBBB / BBB The moderate-credit-quality rating assigned by ICRA. The rated instrument carries higher than average credit risk.
LBB / BB The inadequate-credit-quality rating assigned by ICRA. The rated instrument carries high credit risk.
LB / B The risk-prone-credit-quality rating assigned by ICRA. . The rated instrument carries very high credit risk.
LC / C The poor-credit-quality rating assigned by ICRA. The rated instrument has limited prospects of recovery.
LD / D The lowest-credit-quality rating assigned by ICRA. The rated instrument has very low prospects of recovery.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ICRA’s Medium-Term Rating Scale (only for Public Deposits)

 

Symbols Rating Definition
MAAA The highest-credit-quality rating assigned by ICRA. The rated deposits programme carries the lowest credit risk.
MAA The high-credit-quality rating assigned by ICRA. The rated deposits programme carries low credit risk.
MA The adequate-credit-quality rating assigned by ICRA. The rated deposits programme carries average credit risk.
MB The inadequate-credit-quality rating assigned by ICRA. The rated deposits programme carries high credit risk.
MC The risk-prone-credit-quality rating assigned by ICRA. The rated deposits programme carries very high credit risk.
MD The lowest-credit-quality rating assigned by ICRA. The rated instrument has very low prospects of recovery.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

For the rating categories LAA through to LC and MAA through to MC, the sign of + (plus) or – (minus) may be appended to the rating symbols to indicate their relative position within the rating categories concerned.
Thus, the rating of LAA+ and MAA+ are one notch higher than LAA and MAA respectively, while LAA- and MAA- are one notch lower than LAA and MAA respectively.

 

Fitch Long Term Credit Ratings

 

Symbols Rating Definition
AAA(ind) AAA' national ratings denote the highest rating assigned in its national rating scale. This rating is assigned to the "best" credit risk relative to all other issuers or issues in the country.
AA(ind) 'AA' national ratings denote a very strong credit risk relative to other issuers or issues in the country. The credit risk inherent in these financial commitments differs only slightly from the country's highest rated issuers or issues.
A(ind) A' national ratings denote a strong credit risk relative to other issuers or issues in the country. However, changes in circumstances or economic conditions may affect the capacity for timely repayment of these financial commitments to a greater degree than for financial commitments denoted by a higher rated category.
BBB(ind) BBB' national ratings denote an adequate credit risk relative to other issuers or issues in the country. However, changes in circumstances or economic conditions are more likely to affect the capacity for timely repayment of these financial commitments than for financial commitments denoted by a higher rated category.
BB(ind) BB' national ratings denote a fairly weak credit risk relative to other issuers or issues in the country. Within the context of the country, payment of these financial commitments is uncertain to some degree and capacity for timely repayment remains more vulnerable to adverse economic change over time.
B(ind) B' national ratings denote a significantly weak credit risk relative to other issuers or issues in the country. Financial commitments are currently being met but a limited margin of safety remains and capacity for continued timely payments is contingent upon a sustained, favorable business and economic environment.
C(ind) This category of national ratings denote an extremely weak credit risk relative to other issuers or issues in the country. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
D(ind) This category of national ratings are assigned to entities or financial commitments which are currently in default.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

Within a band of rating symbols from ‘AA(ind)’ to ‘B(ind)’, the signs "+" or "-" may be
appended to a rating to denote relative status within the rating category.

 

Brickwork Rating Symbols for Long term debt instruments

 

Symbols Rating Definition
BWR AAA (BWR Triple A)  Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.  
BWR AA
(BWR Double A)
Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
BWR A Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
BWR BBB (BWR Triple B) Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
BWR BB (BWR Double B) Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
BWR B Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
BWR C Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
BWR D Instruments with this rating are in default or are expected to be in default soon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

a. Modifier {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories BWR AA to BWR C to reflect the comparative standing within the category.

b. BWR assigns rating “outlook” for ratings from 'AAA' to 'B'.  The Rating outlook indicates the direction a rating is likely to move over a period of time and may be classified as Positive, Stable or Negative.

c. NS (Not Significant) Rating
 
BWR may assign NS (Not Significant) Rating  when an existing rating  ceases to have any significant relevance for reasons which such as the  issuer undergoing any structural changes or   temporary protection from the regulators/ courts/ bankruptcy laws in BIFR,  etc,

Brickwork Rating Symbols for Fixed Deposit Ratings

Symbols Rating Definition
BWR FAAA (BWR F Triple A) Deposits with this rating are considered to offer the highest degree of safety, in terms of timely servicing of interest & principal
BWR FAA  (BWR F Double A) Deposits with this rating are considered to offer  high degree of safety, in terms of timely servicing of interest & principal
BWR FA  Deposits with this rating are considered to offer adequate degree of safety in terms of timely servicing of interest & principal
BWR FB Deposits with this rating are considered to offer low degree of safety, in terms of timely servicing of interest & principal
BWR FC  Deposits with this rating are considered to offer very low degree of safety, in terms of timely servicing of interest & principal
BWR FD  Deposits with this rating are in default or expected to default on maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

a. Modifier {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories BWR FAA to BWR FC. The modifiers reflect the comparative standing within the category.

b. NS (Not Significant) Rating
BWR may assign NS (Not Significant) Rating  when an existing rating  ceases to have any significant relevance for reasons which such as the  issuer undergoing any structural changes or temporary protection from the regulators/ courts/bankruptcy laws in BIFR,  etc,

c. BWR assigns rating outlook for Ratings BWR 'FAAA' to 'FB'. The Rating outlook indicates the direction a rating is likely to move over period of time and may be classified as Positive, Stable or Negative.

d. BWR speculative grade ratings are lower than BWR FA.  As such, BWR FB, BWR FC or BWR FD ratings are considered to have speculative characteristics. BWR’s lowest rating category of BWR FD is normally event specific.

 

ADS BY GOOGLE

Ask the Experts

Get your Personal Finance queries answered

  • Q

    If I put Rs 2 lakh in PPF, how much tax rebate I will get?

    A

    As per the existing guidelines and rules a person cannot deposit more than 1.5 lacs in one PPF account. However you can deposit money in the...

  • Q

    Interest rates are going to go down. And all my fixed deposits will be maturing next year. I will have to renew my fixed deposits next year at lower rate of interest. What is the way out?

    A

    Interest rates keep fluctuating due to various micro- and macro- economic factors. There is never an ideal rate of interest. In a high inter...

  • Q

    I want to buy online term life insuance plan. Which is the best one? Should I go for single premium or regular premium policy?

    A

    Single premium term insurance policies don?t make much sense. Why pay such a large amount at one go when you have the option of paying in sm...

  • Q

    I want to invest some money with at least ten years view. I dont want share market risk. Can I invest in NSC? Is there any other investment option?

    A

    NSC or National Savings Certificate is a safe investment scheme offered by the Central Government. It is an ideal option for investors with ...

  • Q

    Is it a good idea to invest in asset allocation funds? if yes, please suggest some good fund to invest money. I am 35 years old and can invest Rs 10000 per month.

    A

    Asset Allocation Funds are for those investors who want to take an exposure into different asset classes but do not wish to create their own...

  • Q

    My CA says that I have to pay tax on interest accrued on my FD of Rs 20 lakh. I have submitted form 15H in all banks. Is it necessary to pay tax in this case?

    A

    In case of interest on fixed deposits which is taxable under the head ?Income from other Sources? a taxpayer has two choices. Either you can...

  • Q

    Please suggest a good investment option of land in South India. I want to buy a land parcel of around 2 acres.

    A

    If you take a look at the South Indian real estate market, Bangalore has emerged as a clear winner. Due to the strong presence of IT/ITeS an...

  • Q

    I want to invest Rs 20000 per month. I have identified Reliance Small Cap Fund and DSPBR Micro cap fund for investment. I can hold to investments for two years. Is it a good idea to invest in these schemes? How much returns I will be getting?

    A

    If you are an aggressive investor, you can consider investing in either of the 2 funds.DSPBR Micro Cap My suggestion is that if you are inve...

  • Q

    I want to save my money for retirment Please suggest a good insurance policy

    A

    For retirement it is advisable to use multiple investment instruments and not just life insurance policies. If you have 15 years or so for r...

  • Q

    IS IT a Good time to invest in GOLD ?

    A

    Currently the outlook for gold is bearish/negative. However if you are planning for a long-term investment in gold it is ideal to invest the...

  • Q

    I have retired from my job in November. I have got Rs 48 lakh from my employers, by way of epf, gratuity and other benefits. Should i invest in senior citizen scheme of LIC? How about pension plans from LIC?

    A

    1. You can invest Post office Senior Citizen Scheme. 2. You also should invest lumpsome in MIP in post office and get monthly interest. 3. K...

  • Q

    I want to save Rs 1 crore for my retirement when i turn 60. Now I am 42 years old and have fixed deposits worth Rs 18 lakh.What should I do to reach Rs 1 cr mark?

    A

    start investing a minimum 5000 per month in mutual fund and increase 10% to 20% every year....

  • Q

    I want to save on my utility bills and fuel expenses.Please suggest a good credit card for me.

    A

    Yes, you will be able to save on Utility bills and fuel expenses through the cash back schemes offered by some of the credit card companies....

  • Q

    Suggest couple of equity mutual funds for me. I am keen to invest Rs 25000 per month for next couple of years. I can remain invested for at least five years?

    A

    Asset Allocation Funds are for those investors who want to take an exposure into different asset classes but do not wish to create their own...

  • Q

    I am a senior citizen.I received interest of Rs .1,70,000/- on FD.I have duly filled 15G form.I have NO other source of income.Have I to pay Income tax on this interest or can it be excempted?

    A

    Sir, please note if you are less than 80 years but more than 60 years of age, your total income upto Rs 3,00,000 is exempt from tax, you are...

  • Q

    Please suggest a good money back policy for me. I am 27 years old and want to accumulate Rs 10lakh over 10 years.

    A

    If you are a fan of traditional money back policies, go in for the LIC New Money Back Policy of 20 or 25 years. I would suggest you go in fo...

  • Q

    I want to buy a life insurance for my brother Please suggest a good policy. He is 19 years old. he should get Rs 5 lakh when he turns 25 years.

    A

    Best to go in for a ULIP in case he is looking to grow the money also. Go in for a ULIP like HDFC Click 2 Invest which is very low on charge...

  • Q

    In 2013, I bought an Endowment policy from LIC. Premium for that is around 35K per year. Now i understand, this was a big mistake and i want to go for a term insurance policy. I have already paid two premiums in 2013 and 2014 and I want to make this policy paid-up. Can i pay one more premium this year and make that endowment policy paid-up ? Or is there any better alternative ? Please suggest.

    A

    Yes, you can convert to a paid-up policy after 3 years premiums have been paid. I would recommend that you surrender the plan and take back ...

  • Q

    Is zero depreciation cover a good option under auto insurance? I have plans to buy honda city in January

    A

    Zero depreciation is a good option to along with the standard car insurance plan. By paying a slightly increased premium you can ensure that...

  • Q

    I am 20 years old,I am getting 17+ % or returns from share in my portfolio consistently for the last 6 months.should i think about a career in stockbroking?

    A

    Its nice to note that your portfolio has been gaining such high returns, however it might be too early to take a call and make stockbroking ...

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.