CRISIL, incorporated in 1987, pioneered the concept of credit rating in India and developed the methodology for rating of debt in the context of India’s financial, monetary and regulatory system. It was the first rating agency to rate Commercial Paper Programme in 1989, debt instruments of financial institutions and banks in 1992 and asset-backed securities in 1992.
The main objective of CRISIL has been to rate debt obligation of Indian companies. Its rating provides a guide to the investors as to the risk of timely payment of interest and principal on a particular debt instrument. Its rating creates awareness of the concept of credit rating amongst corporations, merchant bankers, brokers, regulatory authorities, and helps in creating environment that facilitates the debt rating. The rating is confined to fixed deposits, debentures, preference shares and short term instruments like commercial paper. CRISIL does not rate equity shares or the performance of the company as a whole.
CRSIL, Rating and Investor Protection
Investors should be familiar with the ratings given by the Credit Rating and Information Services of India Ltd. (CRISIL) for protecting their interests. The CRISIL ratings are given only for debt instruments of companies, namely, Commercial Papers (CP), debentures, bonds and fixed deposits. Since early 1992, the ratings of Investment Information and Credit Rating Agency (ICRA) are also used by companies.
The ratings in use by the companies are published by the CRISIL in their “CRISIL Rating Scan.” The companies use them only when the ratings are favorable to them and when They are making any public offer for deposits or debentures, etc. The investors should examine these symbols with regard to their benefits and their implication. Since a rating given can be revised upwards or downwards, the investors should keep a watch on any such revisions.
Rating of company deposits is made Compulsory under the new companies Bill 1993. The implications of the rating used are as follows:
- For Debentures, simple ‘A’ and ‘B’ are used; for preference shares, ‘pr is prefixed.
- For fixed deposits and short-term instruments, ‘F’ and ‘P’ are prefixed.
| Debenture Ratings | Implication |
| Triple A – (AAA) | – Highest Safety |
| Double A – (AA) | – High Safety |
| Single A – (A) | – Adequate Safety |
| Triple B – (BBB) | – Moderate Safety |
| Double B – (BB) | – Inadequate Safety |
| B, C & D | – High risk and default-prone |
| Fixed Deposits Ratings, | |
| F Triple A – (FAAA) | – Highest Safety |
| F Double A – (FAA) | – High Safety |
| F Single A – (FA) | – Adequate Safety |
FB, FC and FD are inadequate, high-risk and default-prone instruments.
