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    History of Credit Rating in India

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    bappa85
    Credit rating first emerged in India in the late 1980s with the establishment of CRISIL in 1987. Subsequently, ICRA and CARE were set up in 1991 and 1993 to expand credit rating coverage. Credit ratings are issued by independent agencies and represent an objective assessment of a borrower's ability to repay debts. The ratings process involves analyzing various financial and operational factors about a company to determine its creditworthiness and risk of default. Credit ratings play an important role for investors, issuers, financial institutions, and regulators in India's growing capital markets.

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    History of Credit Rating in India

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    bappa85
    4K views9 pages
    Credit rating first emerged in India in the late 1980s with the establishment of CRISIL in 1987. Subsequently, ICRA and CARE were set up in 1991 and 1993 to expand credit rating coverage. Credit ratings are issued by independent agencies and represent an objective assessment of a borrower's ability to repay debts. The ratings process involves analyzing various financial and operational factors about a company to determine its creditworthiness and risk of default. Credit ratings play an important role for investors, issuers, financial institutions, and regulators in India's growing capital markets.

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    Credit rating first emerged in India in the late 1980s with the establishment of CRISIL in 1987. Subsequently, ICRA and CARE were set up in 1991 and 1993 to expand credit rating coverage. Credit ratings are issued by independent agencies and represent an objective assessment of a borrower's ability to repay debts. The ratings process involves analyzing various financial and operational factors about a company to determine its creditworthiness and risk of default. Credit ratings play an important role for investors, issuers, financial institutions, and regulators in India's growing capital markets.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    4K views9 pages

    History of Credit Rating in India

    Uploaded by

    bappa85
    Credit rating first emerged in India in the late 1980s with the establishment of CRISIL in 1987. Subsequently, ICRA and CARE were set up in 1991 and 1993 to expand credit rating coverage. Credit ratings are issued by independent agencies and represent an objective assessment of a borrower's ability to repay debts. The ratings process involves analyzing various financial and operational factors about a company to determine its creditworthiness and risk of default. Credit ratings play an important role for investors, issuers, financial institutions, and regulators in India's growing capital markets.

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    HISTORY OF CREDIT

    RATING IN INDIA
    FIRST EMERGED IN 1940s FOLLOWING
    THE FINANCIAL CRISIS OF 1937 IN NEW
    YORK.
    THE STANDARDS &POOR WAS FORMED
    IN 1941.
    IN 1970s A NUMBER OF CREDIT RATING
    COMPANIES STARTED OPERATIONALL
    OVER THE WORLD.
    CREDIT RATING IN INDIA
     THE CONCEPT CAME IN INDIA IN 1987
    WITH THE SETTING UP OF CRISIL.
     AS THE SCOPE OF CREDIT RATING
    WIDENED ICRA & CARE WAS SET UP IN
    1991 & 1993 RESPECTIVELY.
     THE FIRST PRIVATE SECTOR CREDIT
    RATING INSTITUTION WAS DUFFS &
    PHELPS CREDIT RATING INDIA PVT.LTD
    FORMED IN 1995(AFTER ANOTHER
    MERGER WITH DCR IT’S KNOWN AS FITCH
    INDIA LTD).
    DEFINITION OF CREDIT
    RATING
     “CREDIT RATING IS AN UNBIASED,OBJECTIVE AND
    INDEPENDENT OPINION AS TO AN ISSUER’S
    CAPASITY TO MEET FINANCIAL
    OBLIGATIONS.”-CRISIL
     “CREDIT RATING IS A SIMPLE AND EASY TO
    UNDERSTAND SYMBOLIC INDICATOR OF THE
    OPINION OF A CREDIT RATING AGENCY ABOUT
    THE RISK INVOLVED IN A BORROWING
    PROGRAMME OF AN ISSUER WITH REFERENCE TO
    THE CAPABILITY OF THE ISSUER TO REPAY THE
    DEBT AS PER TREMS OF ISSUE.THIS IS NEITHER A
    GENERAL PURPOSE EVALUATION OF THE
    COMPANY NOR A RECOMMENDATION TO BUY,
    HOLD OR SELL A DEBT INSTRUMENT.” -ICRA
    NEED FOR CREDIT
    RATING
    1. THE INCREASING ROLE OF MONEY & CAPITAL
    MARKET CONSEQUENT TO
    DISINMTERMEDIATION.
    2. INCREASED SECURITISATION OF BORROWING
    AND LENDING CONSEQUENT TO
    DISINMTERMEDIATION.
    3. GLOBALISATION OF CREDIT MARKET.
    4. WITHDRAWAL OF GOVERNMENT SAFETY NETS &
    THE TREND TOWARDS PRIVATISATION.
    5. GROWTH OF CONFIDENCE IN THE EFFICIENCY
    OF OPEN MARKET MECHANISM.
    IMPORTANCE OF CREDIT
    RATING
    1. CREDIT RATING & INVESTOR.

    3. CREDIT RATING & THE ISSUER.

    5. CREDIT RATING & THE INTERMEDIARIES.

    7. CREDIT RATING & THE REGULATORY


    BODIES.
    RATING METHODOLOGY
    1. THE RISK FACTOR.
    2. EXAMINING THE INCONSISTENCIES.
    3. STREES ON FUNDAMENTALS.
    a) INDUSTRY OUTLOOK
    b)MANAGEMENT QUALITY
    c)ACCOUNTING PRACTICES
    d)FINANCIAL POSITION
    SHORT TERM LIQUIDITY
    f)RATIO ANALYSIS
    4.STRUCTURAL FACTORS
    5.GLOBAL CHANGES
    RATING PROCESS:INDIAN
    SCENARIO
    1. INITIAL CONTACT
    2. MEETING COMPANY EXECUTIVES
    3. MEETING THE MANAGEMENT
    4. ASSIGNMENT TO ANALYST TEAM
    5. PREPARATION OF RATING PROFILE.
    6. PRESENTATION BEFORE THE COMMITTEE
    7. RATING DECISION
    8. NOTIFICATION OF RATING
    9. ISSUE’S REPRESENTATION
    10. REVIEW BY RATING COMMITTEE
    FACTORS CONSIDERED
     MANUFACTURING-INDUSTRY RISK,MARKET
    POSITION,OPERATING EFFICIENCY,LEGAL
    POSITION,ACCOUNTING QUALITY,EARNINGS
    PROTECTION,CASH FLOW,FINANCIAL
    FLEXIBILITY.
     FINANCIAL-LIQUIDITY MANAGEMENT,ASSET
    QUALITY,PROFITABILITY,FINANCIAL
    POSITION,INTEREST&TAX SENSIVITY,
     REAL ESTATE
     INDIAN STATES
     BANKS
    DIVERSIFICATION OF
    BUSINESS
     INSURANCE COMPANIES
     HEALTH CARE INSTITUTION
     CORPORATE GOVERNANCE RATING
     CONSULTANTS RATING
     EDUCATIONAL INSTITUTIONS RATING
     ADVISORY SERVISES TO STATE GOVT.

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