These products are traded on the secondary securities market and are provided by several companies, as well as the national government. The credit rating agencies of India provide a clear picture of the creditworthiness of a particular financial institution. The creditworthiness of a particular financial institution describes the financial ability of that company of paying back a loan and providing good interest rates for the loans.
The credit rating agencies of India measure the creditworthiness of debt obligation providers through certain processes. These ratings are provided after considering the financial history of the companies and so on. On the other hand, the value of assets of the companies and present financial liabilities are also considered for the purpose. These ratings provided by the credit rating agencies of India are very helpful for the investors because they can get a clear idea of the expected returns and risk factor involved in the process. At present, these credit ratings are used for several other purposes like determining the insurance premiums and many more.
The credit rating agencies of India assign the following ratings to the companies: AAA: These ratings provided by the credit rating firms denote highest safety. This means that the investment done in the company or in the government bonds are safe and at the same time, the returns and high interest rates are guaranteed.
AA: Investment in the companies with AA ratings is also very secured. The AA ratings represent high degree of safety.
A: Companies provided with A rating by the Credit Rating Agencies of India can provide adequate safety to the investments and there are some risks involved in the process.
BBB: This rating is not negative, but investment in these companies includes some risk factors. According to the credit rating agencies of India, these companies can provide moderate safety to the investment.
BB: A company with such rating is eligible for providing sub-moderate safety to the investment.
Credit ratings such as ‘B’, ‘C’ and ‘D’ are somehow negative because these ratings denote inadequate safety, substantial risk and default respectively. So investing in these companies can be risky at times.
Last Updated on : 27th June 2013