FAQs for Bankers

1. What is a credit rating?

A credit rating is an opinion on the likelihood of a debt obligation being repaid in full and on time. Ratings are represented by alphanumeric symbols. 

2. What is its applicability?

Ratings from CRISIL are statements of opinion as of the date they are assigned. A CRISIL rating is not a recommendation to sanction/ continue/ reduce/ recall the rated bank facility or to buy/ sell/ hold any instrument.

 

The Reserve Bank of India (RBI) Master Circular on Prudential Guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF) clearly lays down the scope of application of external ratings by banks and states that: “Banks should use the chosen credit rating agencies and their ratings consistently for each type of claim, for both risk weighting and risk management purposes”.

3. How is rating validity ascertained?

CRISIL shares a rating letter with all clients, clearly specifying the details of rated facilities, rating assigned, and validity. In addition, for each outstanding CRISIL rating, a publicly available document - rating rationale - is published on our website, www.crisil.com. CRISIL keeps all its outstanding ratings under constant surveillance and hence these can change with time. The rating rationale published on CRISIL’s website carries the most recent rating. The rating letter has to be validated with the rating rationale available on CRISIL’s website. 

4. Can the letter of acceptance be used as a valid rating letter?

The letter of acceptance (LoA) is not a rating letter. It cannot be used as a substitute for a valid rating letter or for risk weightage purposes. 

 

The only process to ascertain the validity of a rating letter is explained in the answer to question no 3.

 

CRISIL shares an LoA along with draft rating rationale with the client before ratings are accepted and made public for the first time. Only after the client accepts the rating by signing the LoA is the rating letter issued, the rating rationale published on the CRISIL website, the rating is kept under surveillance and thus forms part of CRISIL’s transition matrix. Until this process is completed, the rating is not in the public domain and cannot be used by banks for risk weightage purposes. As per Section 6.2.5 the of RBI’s NCAF, ratings that are made available only to the parties to a transaction do not satisfy the requirement.

 

If the client chooses not to accept the rating assigned by CRISIL, even though the unaccepted rating is disclosed on CRISIL’s website as per regulatory requirements, such ratings are not kept under surveillance. Consequently, they do not form part of CRISILs transition matrix and are ineligible for use by banks as outlined in Section 6.2.5 of the RBI’s NCAF, which states that a rating must be published in an accessible form and included in the external credit agency’s transition matrix.

 

 

5. Can rating rationales tagged ‘update’, ‘advisory’ or ‘issuer not cooperating’ be used as valid rating?

Ratings rationales tagged ‘update’/ ‘advisory’/ ‘issuer not cooperating’ cannot be used as a substitute for a valid rating for risk weightage purposes. 

 

All outstanding CRISIL ratings are kept under constant surveillance. In case of non-cooperation by the issuer, CRISIL cannot review these ratings and hence issues an update and advisory and ultimately marks the ratings as ‘issuer not cooperating” as per regulatory timelines. Consequently, these ratings do not form part of CRISIL’s transition matrix and are ineligible for use by banks as outlined in Section 6.2.5 of the RBI’s NCAF, which states that a rating must be published in an accessible form and included in the external credit agency’s transition matrix.

6. How much time does CRISIL take to conclude a rating assignment?

CRISIL communicates the ratings assigned to a company within 21 working days of receipt of the duly signed rating agreement, rating fees, all relevant information, and conclusion of management meeting. Once the client accepts the rating, CRISIL issues a rating letter and publishes the rating rationale on its website.

 

You can contact CRISIL’s helpline number +91-1800-267-1301, or write a mail to crisilratingdesk@crisil.com to check the status of the rating assignment.

7. What is the rating scale? What are ‘investment grade’ and ‘speculative grade’ ratings?

CRISIL uses the following scale to rate long-term obligations (with original maturity of more than 1 year)

 

Rating category Description Grade
CRISIL AAA
(Highest safety)
Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk. Investment grade
CRISIL AA
(High safety)
Instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
CRISIL A
(Adequate safety)
Instruments with this rating are considered to have an adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
CRISIL BBB
(Moderate safety)
Instruments with this rating are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
CRISIL BB
(Moderate risk)
Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations. Speculative grade
CRISIL B
(High risk)
Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligations.
CRISIL C
(Very high risk)
Instruments with this rating are considered to have very high risk of default regarding timely servicing of financial obligations.
CRISIL D
(Default)
Instruments with this rating are in default or are expected to be in default soon.
  • CRISIL may apply a '+' (plus) or '-' (minus) sign to a rating in the 'CRISIL AA' to 'CRISIL C' categories to reflect comparative standing within a category.
  • CRISIL may assign rating outlooks for ratings from 'CRISIL AAA' to 'CRISIL B'. Ratings put on ‘Rating Watch’ will not carry outlooks.
  • Outlooks indicate the direction in which ratings may move over 1-2 years, or the ‘medium term’. An outlook can be 'Positive', 'Stable', or 'Negative'. 'Positive' or 'Negative' outlooks are not necessarily precursors to a change in rating.

CRISIL uses the following scale to rate short-term obligations (with original maturity less than 1 year)

 

Rating category Description Grade
CRISIL A1 Instruments with this rating are considered to have a very strong degree of safety regarding timely payment of financial obligations. Such instruments carry the lowest credit risk. Investment grade
CRISIL A2 Instruments with this rating are considered to have a strong degree of safety regarding timely payment of financial obligations. Such instruments carry low credit risk.
CRISIL A3 Instruments with this rating are considered to have a moderate degree of safety regarding timely payment of financial obligations. Such instruments carry higher credit risk compared with instruments rated in the two higher categories.
CRISIL A4 Instruments with this rating are considered to have a minimal degree of safety regarding timely payment of financial obligations. Such instruments carry very high credit risk and are susceptible to default. Speculative grade
CRISIL D Instruments with this rating are in default or expected to be in default on maturity.
  • CRISIL may apply a '+' (plus) sign for ratings from 'CRISIL A1' to 'CRISIL A4' to reflect comparative standing within the category.

Questions?

  • To get a copy of rating reports, please email us at:
    crisilratingdesk@crisil.com

  • For analytical queries, please email us at:
    ratingsinvestordesk@crisil.com

  • For any other information,  please call or email us at:
    +1800 267 1301
    crisilratingdesk@crisil.com