History of Rating

Standard and Poors

Henry Varnum Poor was a leader in establishing the financial information
industry on the principle of the investor right to know.

In 1941 Standard statistics and Poors publishing company merged together

to form S&P They provide credit ratings, indices, risk evaluation, investment research and data.

History of Rating
Moodys
It published Moodys manual of industrial and miscellaneous securities in the first year. It provided information and statistics on stocks and bonds of financial institutions, government agencies, manufacturing, mining, utilities and food companies. In 1907, due to stock market crash, the co. was closed and again came back in 1909 in which he offered to investors an analysis of security values

Other world wide agencies

A.M.Best (US) which specializes in Insurance company ratings Dominion Bond Rating service (Canada / US) is based at Toronto, canada. Fitch Ratings Ltd. Is an international CRA. Headquartered at New york city and London Baycorp Advantage (Australia and New zealand) Dun & Bradstreet (US) called as D-U-N-S (Universal Numbering System)

Credit Rating in India

CRISIL 1987 Promoted by ICICI, UTI,LIC,GIC,SBI S&P is the largest SH. It is Indias leading ratings, financial news, risk and policy advisory company. Ratings are for short, medium and long term debt instruments issued by manufacturing co., NBFCs, municipal bodies, state governments, real estate and health care institutions. It rates debentures, preference shares and fixed deposits

Credit Rating in India

ICRA - 1991 Promoted by IFCI, SBI, LIC, PNB, CBI, Allahabad Bank. Moody is the largest SH. It undertakes credit ratings, equity grading for industrial sectors both in India and abroad and offers ratings, Information and advisory services. Ratings are for short, medium and long term debt instruments issued by corporate, ULB. It rates Bonds and Non convertible debentures

Credit Rating in India

CARE APRIL 1993 Promoted by IDBI, Canara Bank, UTI It undertakes credit ratings, Information and Advisory services. It is retained by GOI for assistance in equity valuation for suggesting divestment strategies. Ratings include public utilities, financial institutions, infrastructure projects, SG and municipal bodies. It rates all types of debt instruments like commercial paper, fixed deposits, bonds, debentures and preference shares.

Credit Rating in India

FITCH 2000 Fitch India is a 100% subsidiary of the Fitch group Fitch rates entities in 75 countries and has 1100 employees in more than 40 local offices world wide * It rates for financial institutions, Insurance, corporate, structured finance and public finance markets Ratings are for short, long term credit and term deposits

Credit Rating in India

SMERA - 2005 Promoted by SIDBI, D&B, CIBIL It is the only agency dedicated to small and medium enterprises It considers financial condition and several qualitative factors to assess the credit worthiness of the SMEs Rating has 2 parts size indicator (net worth) and composite appraisal / condition indicator

Credit Rating in India

BRICKWORK - 2008 Promoted by Bangalore based individual with the aim to provide unbiased information to Indian Investor Ratings are for short, medium and long term debt instruments , mutual fund schemes and IPO BRICKWORK ratings are acceptable to banks in India for their loan assessment process as per RBI circular

Benefits of Credit Rating

For INVESTORS:
Independent and professional judgment of the credit quality of the instrument. Low cost supplement to the in-house appraisal system of organized institutional investors It can be used by the investor to optimize risk return preference For ISSUERS: There is a faith placed by the market on opinions of rating agencies. It is benchmark for issue pricing and result in savings in costs.

Limitations of Credit Rating

They are not recommendations to invest. Ratings tend to be sticky. They can be changed only periodically It is based on some events, news or happenings and following extrapolated projections It is a human perception It lead to financial crisis, financial instability and cross country contagion