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NAME ROLL NO. PRIYANK DARJI 06 HARDIK NATHWANI 27 SHASHANK PAI 28 SAGAR PANCHAL 29 DHARMIK PATEL 32 KUSH SHAH 393 SIDDARTH TAWDE 46
The first mercantile credit agency was set up in New York in 1841 to rate the ability of merchants to pay their financial obligations. Later on, it was taken over by Robert Dun. This agency published its first rating guide in 1859. India was perhaps the first amongst developing countries to set up a credit rating agency in 1988. With the increasing market orientation of the Indian economy, investors value a systematic assessment of two types of risks, namely “business risk” arising out of the “open economy” and linkages between money, capital and foreign exchange markets and “payments risk”. 4
According to S&P “Credit ratings help investors by providing an easily recognizable, simple tool that couples a possibly unknown issuer with an informative and meaningful symbol of credit quality” According to Moodys “ A rating is an opinion on the future ability and legal obligation of the issuer to make timely payments of principal and interest on a specific fixed income security. 5
To compare the loan on the basis of quality of credit and loan. Credit rating agencies also assist to portfolio monitoring Credit Rating Credit quality of transparency. Credit rating of money market securities. 6
CRISIL was set up in the year 1987. It was set up in order to rate the firms and then entered into the field of assessment service for the banks. The head office of the company is located at Mumbai and it has established offices outside India also. CRISIL is a global analytical company providing ratings, research and risk and policy advisory services. CRISIL is the largest credit rating agency in India. CRISIL’s majority shareholder is STANDARD and POOR’s. 11
CONT.......2) ICRA: ICRA Limited (formerly Investment Informationand Credit Rating Agency of India Limited) was set up in1991 by leading financial/investment institutions,commercial banks and financial services companies as anindependent and professional Investment Information andCredit Rating Agency.ICRAs five point IPO Grading ScaleIPO Grade 5 Strong fundamentalsIPO Grade 4 Above-average fundamentalsIPO Grade 3 Average fundamentalsIPO Grade 2 Below-average fundamentalsIPO Grade 1 Poor fundamentals 13
3) CARE ((Credit analysis and research limited))CARE Ratings commenced operations in April 1993 and overnearly two decades, it has established itself as the second-largest credit rating agency in India. With the rating volumeof debt of around Rs.33,062 bn (as on June 30, 2011).4) DCR(Duff & Phelps credit rating india limited)It was founded in 1932 to provide high quality investmentresearch services focused on the utility industry. Over thedecades, it evolved into a diversified financial services firmthat provides financial advisory, investment banking, creditrating and investment management services. 14
CRAs should maintain records of the rating committee. Information about the historical default rates of their rating categories. CRAs should ensure that its analysts do not participate in any kind of marketing and business development. CRAs while rating structured finance products, are barred from providing consultancy or advisory services regarding the design of the structured finance instrument. 15
Credit rating is an input for decision making. A credit rating is not a recommendation to buy, hold or sell a security. A rating is one of the inputs that is used by investors to make an investment decision. Investors expect higher returns for lower rated instruments. Rating agencies do not comment on the return being offered on a security. Also, investors use several other factors like level of portfolio diversification and liquidity levels of the security etc. in making investment decisions. 16