1. What is a credit rating?

A credit rating represents the rating agency's opinion on the likelihood of a rated debt obligation being repaid in full and on time. A simple alphanumeric symbol is normally used to convey a credit rating.

2. How does a credit rating agency differ from a credit bureau?

A credit rating agency provides an opinion relating to future debt repayments by borrowers. A credit bureau provides information on past debt  repayments by borrowers.

3. Is a credit rating a recommendation to invest in a debt instrument?

A credit rating is not a recommendation to buy, hold, or sell a debt instrument. A credit rating is one of the inputs used by investors to make an  investment decision.

4. What is the difference between credit rating and equity research?

Credit ratings are assigned to debt instruments, while equity research relates to equity shares. A credit rating is focused on the risk of non-payment,  the primary variable in debt instruments. Equity research is focused on growth possibilities, for that is what drives equity valuations.

5. How does a credit rating differ from an audit?

A credit rating agency relies on a variety of information sources, including published annual reports. An audit process is designed to detect fraud or  misrepresentation of information, whereas the credit rating process is not.

6. How does a rating agency operate when issuers' disclosure levels are low?

An accurate assessment of the credit rating of an entity depends on the availability of adequate and reliable information on the rated entity. Moreover,  CRISIL ratings are under continuous surveillance over the life of the instrument which necessitates that CRISIL has continuous access to adequate  and reliable information on the rated entity to ensure that its rating reflects the most recent credit opinion. Absence of information significantly  affects the ability to make accurate assessment of business, financial and management risk of an entity which drives the credit rating. Please refer to  CRISIL Ratings publication dated April 30, 2012 - 'Information Availability - a key risk factor in credit ratings'. In case the rated entity does not provide i  information and/or does not facilitate meetings with key personnel required for rating, that entity may be classified as non-cooperative. For entities  classified as non-cooperative, CRISIL Ratings will continue to review the ratings on an ongoing basis throughout the instrument/facility’s lifetime, on  the basis of best available information.

7. Does a credit rating assure repayment?

A credit rating is not an assurance of repayment of the rated instrument. Rather, it is an opinion on the relative degree of risk associated with such  repayment. This opinion represents a probabilistic estimate of the likelihood of default.

8. Who pays for a credit rating?

Most credit rating agencies across the world use a revenue model where the issuer pays for the credit rating. Alternative revenue models (such as the  one based on investor fees) pose numerous challenges in terms of ease and practicality of implementation that have not yet been overcome.

9. If the issuer pays for the rating, how does a credit rating agency maintain its independence?

Although the issuer pays for the rating, the investor uses it. Like any other product or service, the 'value' of the rating depends entirely on the  perceptions of the investor. Investor perceptions are based on the credibility of the past ratings assigned by each rating agency. (Please also refer to  section - How CRISIL manages Conflict).

10. Who regulates a rating agency?

The capital market regulator regulates rating agencies in most regions. In India, the capital markets regulator, the Securities and Exchange Board of  India (SEBI), regulates the rating agencies in the country.

11. Is competition desirable in the credit rating industry?

Competition in the credit rating industry is desirable to meet the 'better service at a cheaper price' objective on an ongoing basis. However, it is  essential to guard against some undesirable effects of competition, such as lax ratings or sub-optimal quality of research and analysis.

12.How do investors benefit from a credit rating?

Credit ratings help investors facilitate comparative assessment of investment options, complement the investors' own credit analysis, and allow asset  monitoring.

13. What do the various credit rating symbols mean?

CRISIL uses simple alphanumeric symbols to convey credit ratings. CRISIL assigns credit ratings to debt obligations on three basic scales: the long- term scale, the short-term scale, and the fixed deposit scale. Please refer to the section on Rating/Grading scale for more details.

14. Does the minus sign in a rating symbol have negative connotations relating to the issuer's performance or its debt-servicing capability?

Plus and minus symbols are used to indicate finer distinctions within a rating category. The minus symbol associated with ratings has no negative  connotations whatsoever.

15. What are Structured Obligation (so) ratings? Are they different from other credit ratings?

Structured Obligation (so) ratings are ratings that are based on a 'credit enhancement' mechanism and/or a structured payment mechanism. A suffix  in the form of '(so)' indicates that the obligation being rated is a “structured obligation” that is different and distinct from the “general obligations” of  the issuer.

16. What is the validity period of a credit rating?

Credit ratings are assigned either to specific instruments or to the general debt obligations of issuers. CRISIL assigns credit ratings to debt  obligations. A rating is valid until it is withdrawn which is usually when the rated debt obligation is fully paid.

17. How are credit rating changes communicated?

Once a credit rating is assigned and published, CRISIL keeps the credit rating under surveillance until the instrument is fully repaid. The surveillance  process may result in credit rating changes from time to time. All changes in CRISIL's credit ratings are communicated publicly through CRISIL's  website ( and media releases.

18.Why do credit ratings change?

Credit ratings are assigned based on certain expectations and assumptions about variables that impact the issuer's performance. However, these  variables can change, causing the rated entities' performance to deviate materially from expectations. This is reflected in their changed credit ratings.

19. If a credit rating is downgraded, does it mean that a default is imminent?

Not necessarily. In most cases, a downgrade does not mean that a default is anticipated. All it indicates is that the risk associated with the debt  obligation is relatively higher than what it was before the downgrade.

20. Does the size of the rated debt obligation affect its credit rating? What are 'Provisional' ratings?

No. What matters is the size of the total debt in the company, and not the amount that is sought to be rated.

21. What are 'Provisional' ratings?

In case completion of certain critical steps/documentation is pending at the time of rating assignment, CRISIL will assign provisional ratings to such  instruments which will be characterised by a prefix 'Provisional' to the rating symbol. To elaborate, a prefix of 'Provisional' to a CRISIL-assigned rating  indicates that the rating centrally factors in the completion of certain critical steps/documentation by the issuer for the instrument; without this, the  rating would either have been different or not assigned. The provisional nature of such ratings will be disclosed by CRISIL in its communications,  including rating letter and rating rationale. Once the relevant steps/documents (as per expectations when the provisional ratings were assigned) are in  place, the provisional ratings will be converted into final ratings. Please refer to CRISIL's release - "Policy on provisional ratings" for further deta


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