Credit rating is the evaluation of
the credit worthiness of an individual or of a business concern or of an
instrument of a business based son relevant factors indicating ability and
willingness to pay obligations as well as net worth.
The main purpose of the credit
rating is to communicate to the investors the relative ranking of the default
loss probability for a given fixed income investment in comparison with of the
rated instruments.
Credit rating will be given by a
credit rating agency which is a body corporate engaged in or proposes to be
engaged in the business of rating of securities offered by way of public or
rights issue
Some of Credit Rating agencies are
below
1. CRISIL (Credit rating and
information services (India) Limited)2. ICRA (Investment (information) Credit Rating Agency)3. CARE (Credit analysis and research
limited)4. India ratings and research Pvt LTD5. Brickwork ratings pvt ltd6. SMERA (SME Rating Agency of India
limited)
These Rating Agencies are regulated
by SEBI (Credit Rating Agencies Regulations) 1999The Credit Rating Process will be·
The
issuer of securities will request the rating agency for credit rating·
The
rating agency will assign a rating team·
The
Rating team will collect the required information about the security and issuer·
The
Rating team will meet the key officials and the
management team·
Rating
committee will conduct a meeting for Rating·
Rating
agency will communicate the Rating to the issuer·
Publication
of the rating
·
Surveillance
and annual review of the performance of the issuer operations
Factors to be considered for Rating
·
Industry
Risk·
Companies
Market position·
Operating
Efficiencies·
Accounting
Quality·
Financial
Flexibility·
Earning
Protection·
Finacial
Leverage·
Cash
flow Adequecy·
Management
Evaluation·
Asset
Quality
