This section carries the research backing the 'rating criteria' adopted by CRISIL which forms the basic framework for rating and helps in adopting a uniform and consistent approach in assigning the ratings. These rating criteria are regularly disseminated by CRISIL in line with its stated policy of improving transparency in the rating process.

  CRISIL has been assigning bank loan ratings (BLRs) since June 2007, following Reserve Bank of India (RBI)'s announcement of the prudential guidelines for implementation of the new capital adequacy framework for banks in April 2007. These guidelines require banks to link the capital they maintain on credit exposure to the external credit ratings on these exposures.

  CRISIL develops and refines its rating criteria and methodologies regularly, in keeping with the evolving trends in the credit markets.

  A company may choose to conduct new businesses as undertakings of its own. Or it may, for legal, tax, and regulatory considerations, choose to conduct these businesses as part of a separate legal entity — a subsidiary, a special purpose vehicle (SPV), or associate/group company.

  CRISIL has noticed a significant increase in the volume of loan restructuring, and the applications filed for such restructuring, in the past few weeks. According to the available data, banks have already restructured loans aggregating to more than Rs. 700 billion in 2008-09 (refers to financial year, April 1 to March 31), most of them in the last quarter.

  After recording phenomenal growth in 2007-08 (refers to financial year, April 1, to March 31) and the first half of 2008-09, the corporate single-loan sell-down (SLSD) market cooled off rapidly.

  The importance of reliable credit risk assessment in financial markets has increased over the years. Credit rating agencies are the foremost providers of third-party credit risk assessment; the efficacy of their performance can therefore have a profound impact on credit markets.

  CRISIL believes that Basel II has opened up wider avenues for investors in the Indian debt market: the growing number of Bank Loan Ratings (BLRs) has reinforced the acceptability of ratings in the mid-range, 'A' and 'BBB' categories.

  In most financial markets, bond investors prefer to have default recognised as soon as a debt servicing payment is missed, in contrast to the relative forbearance that the loan markets exhibit.

  CRISIL's rating process is designed to ensure that all ratings are based on the highest standards of independence and analytical rigour.

  A CRISIL credit rating indicates CRISIL's current opinion on the probability of default. In other words, the credit rating indicates the probability of an investor in rated instruments, or a lender to a rated entity, not receiving interest and principal payments due on time and in accordance with the terms of the initial contract.

  The analysis of a company's financial ratios is core to CRISIL's rating process. Hence, users of CRISIL's ratings, including investors in corporate debt, need to understand CRISIL's approach to financial ratios and the formulae employed in computing them.

  Hybrid instruments are securities that combine the characteristics of both debt and equity. Such instruments have come in vogue as issuers, investors, regulators and other stakeholders have begun to appreciate their ability to marry different interests.

  CRISIL's treatment of hybrids in its bank rating analyses coincides with the instruments' regulatory treatment. One of the main parameters CRISIL examines is the instrument's 'loss absorption capacity'.

  The Reserve Bank of India (RBI) has allowed Indian banks to raise hybrid Tier I and Tier II capital. Using these instruments, banks can augment their capital adequacy levels to meet both current and upcoming requirements arising on account of market and operational risks.

  CRISIL developed its comprehensive notch-up criteria for parent-supported ratings in mid-1999. CRISIL notches up ratings for parent support on the hypothesis that an entity's creditworthiness is not only dependant on its own business and financial strengths but also on its lineage and the relationship that it enjoys with its parent.

  CRISIL developed its comprehensive notch-up criteria for group-supported ratings in mid-1999. CRISIL notches up for group support when more than one entity belonging to a single group has a significant shareholding in the entity to be rated.

  Just as CRISIL's ratings of private sector entities not only reflect the standalone credit quality of an entity but also factor in the support that it may enjoy from its parent, in the case of government-owned entities too, CRISIL factors in the likely support from the government while assigning its ratings.

  In an increasingly globalised investment environment, one of the issues that Indian investors frequently face is the correlation between the rating symbols of domestic and global rating agencies.

  CRISIL has been assigning short-term ratings for over 15 years for commercial paper (CP) and short-term debt (STD), and has rated issues made by more than 700 issuers.

  CRISIL assigns bank loan ratings to a variety of facilities provided by banks: these include working capital demand loans, cash credit, project and general corporate loans, and non-fund based facilities.