How reliable are CRISIL Ratings for Fixed Deposit?
Earlier, many Non-Banking Financial Companies (NBFCs) defaulted in repaying the promised principal amount and rate of interest of Fixed Deposits calling for great loss for the customers. Due to this reason, many credit rating agencies like CRISIL (Credit Rating Information Services of India Limited), CARE (Credit Analysis and Research), and ICRA (Investment Information and Credit Rating Agency) rate the financial companies offering Fixed Deposits.
CRISIL has pioneered the credit rating sector of India earning the trust of people from all over. This credit agency rates a range of debt instruments like bank loans, non-convertible debentures, asset-backed securities, perpetual bonds, mortgage-backed securities, deposit certificate, commercial paper, partial guarantees, etc.
How Does CRISIL Work?
CRISIL engages in offering a dedicated rating for Fixed Deposits. The ratings reflect the issuer’s credit quality, debt repayment profile, liquidity, funding sources, maturity profile, renewal rate, and the granularity in the service. Below mentioned are the types of ratings covered by CRISIL:
The Governance and Value Creation Rating reflects the company’s ethical business conduct, commitment to values, corporate governance practices, and provides a balance between the quantitative and qualitative factors.
Credit Quality Rating
The credit quality rating reflects the protection level of the fund against the losses from defaults in the credit. Funds that do not have a maturity date is assigned by long-term ratings and funds that have a maturity date equal to one year, or less is assigned by short-term ratings.
Broker Quality Grading
The broker quality grading reflects the quality of the service provided by the company, system framework, credit risk profile, market risk management, compliance quality, and external interface. This grading protects the interests of investors by preserving financial integrity and market integrity.
Financial Strength Rating
The financial strength rating reflects the ability of the financial company to fulfill the liabilities of the policyholder. This rating analyses the business risks, parental support, business plan, financials, and industry risk across the financial sector.
Recovery Risk Rating
The recovery risk rating reflects the volatility in the recovery of the losses of the policyholder post repayment default. The rating depicts the quality of assets, collateral coverage, and seniority of the company.
How Does CRISIL Affect the Investor?
Investors, as well as lenders, consider CRISIL rating as a benchmark for trading with the financial provider. This rating aids the financial provider in managing and measuring the risk involved in the financial product. Also, it determines the eligibility of the company to avail investment pool and the company’s competence in the financial sector. Following are the rating system adopted by CRISIL to rate Fixed Deposits:
●NM: Not Meaningful
●FC: High Risk
●FB: Inadequate Safety
●FA: Adequate Safety
●FAA: High Safety
●FAAA: Highest Safety
Higher the safety rating, more is the credibility of the financial provider offering assured and timely returns from your investment. CRISIL shows an unbiased assessment of the financial company based on the history of timely repayment ability. This aids the investors in choosing the right financial company based on the financial health of the company.
How to Find the Right Financial Provider?
As mentioned above, you need to check the credit rating of the financial provider to determine the credibility. One of the leading NBFCs of India, Bajaj Finance offers a range of financial products including Fixed Deposits. CRISIL has accredited the company with FAAA highest credit rating. You can deposit a sum as low as Rs 25,000 and flexibly choose the tenor of your FD from 12 months to 60 months. If you renew your plan, you will earn a higher FD interest rate at each renewal. Also, you can choose the interest payout frequency from a monthly, quarterly, half-yearly, or yearly basis. Moreover, in case of emergencies, you can avail loan against FD and use up to 90% of the accrued sum.
Aisha Aggarwal is a passionate blogger. He has expertise in writing finance articles. He have been serving society as a financial adviser. He loves keeping himself up-to-date with the news and happenings around. He is always open to learning and shares his experiences on his Greetings of the Day.