pnb housing
February 6th, 2020

CRISIL Ratings and Their Effect on Fixed Deposits

Blog Seprator

Investing in a credible tool with ensures guaranteed option for a viable income and asset development. With several investment tools available in the market, determining the right tool that synchronizes with the goals of the investor can sometimes prove to be laborious. In such cases, credit ratings by companies can assist investors in making an informed decision. Devised below is a comprehensive guide on the CRISIL rating and its effect on fixed deposit.

What is CRISIL Rating?

CRISIL is India’s first credit rating agency that spearheaded the concept of credit rating in the country. CRISIL full form is Credit Rating Information Services of India Limited. It evaluates a large number of financial companies, including banks, Non-Banking Financial Company (NBFC), housing finance companies, securities firms, etc. Established in 1989, CRISIL is a pioneer in credit rating agencies with assessments conducted for banks constituting almost 90% of the banking sector and 80% of NBFCs in India.

How is the assessment process carried out by CRISIL?

CRISIL utilizes the ‘CRAMEL’ structure to assess financial platforms. It encompasses six parameters of assessment, which are :

  • C: Capital
  • R: Resource Raising Ability
  • A: Asset Quality
  • M: Management
  • E: Earnings
  • L: Liquidity

Note: CRISIL also utilizes financial tool-specific risk assessment factors, techniques, and ratings to rank the same. It thus offers investors a credible and unbiased opinion on the relative safety of the financial tool.

Listed below are the steps of the assessment process followed by the CRISIL team:

  • The assessment process begins with the issuer submitting a request for rating and signing the rating agreement along with the submission of the required information and rating fee.
  • The CRISIL team then assigns a rating team and conducts a preliminary analysis
  • Interaction with the management team is also carried out.
  • The analysis is presented to the rating committee which is then conveyed to the issuer
  • The issuer can review the rating and can choose to accept or deny the rating
    • If accepted, the score is circulated on the CRISIL website as rating rationale
    • If denied, the issuer can decide to appeal or not appeal against the grade.

CRISIL Ratings and Fixed deposits

The following is the rating system followed for Fixed deposits by CRISIL.

Rating Significance
NM Not Meaningful
FD Default
FC High Risk
FB Inadequate Safety
FA Adequate Safety
FAA High Safety
FAAA Highest safety

What does FAAA rating mean?

PNB Housing Finance Fixed Deposits have a FAAA rating from CRISIL which indicates the highest safety, lowest investment risk and principal is very strong.

This rating is one of the best gauges for investors while looking for company fixed deposits. Smart investors first verify the credibility of the platform and tool through CRISIL before making any investment. Investors get divided between choices while making decisions between banks that offer higher interest rates and banks with high CRISIL rates. Here is why investors should choose CRISIL rates over interest rates.

  • Financial institutions that offer a higher rate of interest with low CRISIL rating is a high-risk investment. The higher rates of interest could be a marketing tool hatched out to attract investors.
  • CRISIL ratings are highly unbiased. It is an assessment based on several parameters, which include a company’s timely repayment capacity and history. Thus this aids investors in making a viable investment on a trustworthy company fixed deposit. A company with higher CRISIL ratings and high fd interest rates are a means for higher returns through FD investment With PNB Housing Finance FD possess FAAA CRISIL rating (highest safety) and offers interest rates up to 8.40%, thus ensuring a secured investment with high returns.

Therefore, while considering CRISIL Ratings for fixed deposits, though these ratings do not directly affect the deposits, it is an assured means for investors in making a wise decision and sorting from the various offers provided by multiple financial platforms.

Final thoughts

With changing market trends and dynamics, a credible credit rating is essential to make an informed decision before an investment. With FDs being the currently preferred tool for investment, CRISIL rating helps investors choose the right lender and right FD scheme of investment.

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