What are the Roles and Rating Parameters of CRISIL & ICRA?

CRISIL and ICRA are the two popular rating companies in India. The following are their major roles and rating parameters for small businesses:

Role of Rating Companies

Credit rating companies like CRISIL and ICRA have to analyze the overall risks associated with any financial institute or financial instrument. They give a rating to the companies only after proper, comprehensive analysis and detailed inspection. Their major role is to carry out inspection and pass the company’s analysis report without being bias.

Basic Rating Parameters 

Usually, these rating companies rate new businesses based on certain factors like energy, materials, structured finance, industrial, health care, information technology, utilities, etc.

These factors are categorized under the following three main parameters: 

1. Business Risks

According to ICRA and CRISIL, factors like future aspects, resources, debt repayment, utilities, clients, business plan, etc. within the business risk category. This parameter is taken into consideration with the company’s overall operations.

2. Financial Risks

This parameter includes factors like resources, money, loan or other types of funding involved for any type of funding.

3. Management Risks

This parameter includes factors like reputation, corporate governance, and senior management’s experience, employee policies, etc.

Rating Parameters of CRISIL

According to CRISIL (Credit Rating Information Services of India Limited), rating of instruments scheme is measured on Fixed Deposits’ dedicated rating scale. Such FD schemes with specific maturity period are rated on a 14-point scale, which ranges directly from FAAA to FD.

The FAAA is the highest and FD is the lowest point on the rating scale, depending on the stability of the company and safety of money. 

Rating parameters of ICRA

ICRA Rating (Investment Information and Credit Rating Agency of India Limited) for financial instruments have two separate rating scales that are named as per short-term rating scale and long-term rating scale.

The financial instruments with more than one year maturity period fall under the long-term rating, whereas the maturity period of less than one year lies on a short-term rating scale.

Also, Read This For More: On What Basis Rating Companies Like CRISIL And ICRA Rate