What is Credit Rating? Credit rating is an assessment of the probability of default on payment of interest and principal on a debt instrument.

It is not a recommendation to buy, sell or hold a debt instrument. Rating only provides an additional input to the investor and the investor is required to make his own independent and objective analysis before arriving at an investment decision. What is a credit rating agency? A credit rating agency is an entity which assesses the ability and willingness of the issuer company for timely payment of interest and principal on a debt instrument. How is a rating denoted? Rating is denoted by a simple alphanumeric symbol, for e.g. AA+, A-, etc. How is credit rating done? Ratings are based on a comprehensive evaluation of the strengths and weaknesses of the company fundamentals including financials along with an in-depth study of the industry as well as macro-economic, regulatory and political environment. How does a Rating help an Investor? When investor does not possess adequate skills for analyzing the repayment capacity of the borrowing company, credit rating serves the purpose to identify the risk involved with the investment decision and investor can make informed investment decision based on his riskreturn preferences. These also help investors to select the appropriate investment opportunities from a large range of options available Is rating a onetime exercise? No. To protect the interest of investors, SEBI has mandated that every credit rating agency shall, during the lifetime of the securities rated by it, continuously monitor the rating of such securities and carry out periodic reviews of all published ratings. Who regulates rating agencies? Credit rating agencies are regulated by SEBI. The SEBI (Credit Rating Agencies) Regulations, 1999 govern the credit rating agencies and provide for eligibility criteria for registration of credit rating agencies, monitoring and review of ratings, requirements for a proper rating process, avoidance of conflict of interest and inspection of rating agencies by SEBI, amongst other things.

Rating Symbols: Symbols CARE AAA CARE AA CARE A CARE BBB CARE BB CARE B CARE C CARE D Rating Definition Highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. High degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. Adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. Moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. Moderate risk of default regarding timely servicing of financial obligations. High risk of default regarding timely servicing of financial obligations. High risk of default regarding timely servicing of financial obligations. Instruments with this rating are in default or are expected to be in default soon.