Credit Ratings offered by CRISIL & CARE in India

In the previous article, we had seen how to choose a Good Corporate FD for investment. Towards the end of the article, I had said that, there will be an article on the ratings offered by Credit Rating Agencies in India. Well, here we are…

Before we Begin - I have already covered Credit Ratings in detail in the following posts. You can visit them to learn more about what Credit Ratings are:

1. Credit Ratings – Explained
2. What is a Credit Rating?

What are the various Credit Rating Agencies in India?

The famous & reputable Credit Rating Agencies in India are:

1. CRISIL and
2. CARE

If you see any investment scheme like Bonds, Corporate FDs etc., chances are that, they are rated by either or both of these agencies.

Ratings by CRISIL

CRISIL like any other rating agency in the world, uses the alphabets A through D to signify the creditworthiness of the Issue. Ratings of FA or above (FAA and FAAA) are considered Investment grade. All lower ratings are considered non-investment grade and must be avoided. The various ratings available are:

Rating	Safety Level	Description
FAAA	Extremely Safe (Highest Safety)	This rating indicates that the degree of safety regarding timely payment of interest and principal is very strong. This is the highest possible rating that CRISIL will assign any issue.
FAA	High Safety	This rating indicates that the degree of safety regarding timely payment of interest and principal is strong.
FA	Adequately Safe	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 like FAA or FAAA.
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	In 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 reorganization or liquidation of the issuer, and the obligation being under dispute in a court of law or before a statutory authority.

Source: CRISIL India

Ratings by CARE:

CARE like any other rating agency in the world, uses the alphabets A through D to signify the creditworthiness of the Issue. Ratings of CARE A or above (CARE AA and CARE AAA) are considered Investment grade. All lower ratings are considered non-investment grade and must be avoided. The various ratings available are:

Rating	Safety Level	Description
CARE AAA	Extremely Safe (Highest Safety)	Instruments with this rating are considered to be of the best credit quality, offering highest safety for timely servicing of debt obligations. Such instruments carry minimal credit risk.
CARE AA	High Safety	Instruments with this rating are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk.
CARE A	Safe	Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk.
CARE BBB	Moderately Safe	Instruments with this rating are considered to offer moderate safety for timely servicing of debt obligations. Such instruments carry moderate credit risk.
CARE BB	Inadequately Safe	Instruments with this rating are considered to offer inadequate safety for timely servicing of debt obligations. Such instruments carry high credit risk.
CARE B	Low Safety	Instruments with this rating are considered to offer low safety for timely servicing of debt obligations and carry very high credit risk. Such Instruments are susceptible to default.
CARE C	Very High Risk	Instruments with this rating are considered to be having very high likelihood of default in the payment of interest and principal.
CARE D	In Default	Instruments with this rating are of the lowest category. They are either in default or are likely to be in default soon.

Source: CARE India

Note: Rating agencies may include a “+” or “-” symbol along with ratings to indicate a relative position within the same rating category. For ex: a AA+ is better than AA which in turn is better than a AA-. However, even AA- is better than the other lower ratings.

Happy Investing!!!