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    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

    March 13, 2019 / 13:38 IST

    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

     

     

    SymbolsRating 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

    SymbolsRating 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
    first published: Aug 18, 2011 03:13 pm

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