Many investors are now moving towards making deposits that provide the best interest rates and the highest degree of safety. But how can a depositor be sure about the security of his funds? For this, there are rating agencies like CARE, CRISIL, and ICRA Ratings to provide a fair and neutral opinion on the creditworthiness of the financial companies offering the investment schemes.
What is CRISIL?
CRISIL is India’s first and the largest credit rating agency which started its operations in 1987. Its promoters were ICICI Ltd and UTI along with other financial institutions. In simple words, CRISIL provides information to a varied set of investors, lenders, issuers, regulators, etc. which help them to assess the feasibility of credit repayment of the financial institution.
Sectors which CRISIL rating covers
CRISIL ratings cover all the banks, financial institutions, industrial companies, infrastructure entities, manufacturing companies, microfinance institutions, mutual funds, non-banking financial institutions (NBFCs), public sector undertakings, state governments, urban local bodies, etc. with a total of 190 industry sectors.
Effect of CRISIL Rating System on FD
CRISIL rates FD schemes of corporate in the non-financial sector on a 14-point rating scale (FAAA to FD). It is a dedicated rating scale for FDs. CRISIL recognises a strong linkage between the rating of an FD programme and the issuer’s long-term credit rating.
CRISIL grades the company fixed deposit schemes, and it also is the first thing that an investor looks into while investing. These ratings ensure the highest degree of safety of your fund. CRISIL ratings help investors to differentiate between high credits risks from low credit risk organisations at the time of investment in an fixed deposit (FD).
Understanding CRISIL’s rating system
CRISIL follows the following rating system for fixed deposits-
| Abbreviation | Meaning |
| NM | Not Meaningful |
| FD | Default |
| FC | High risk |
| FB | Inadequate safety |
| FA | Adequate safety |
| FAA | High safety |
| FAAA | Highest safety |
CRISIL score and FD interest rate
Financial institutions which receive low CRISIL rating offer higher rates of interest on their fixed deposit accounts. But this is usually a high-risk investment. Financial institutions with bad CRISIL rating offer highest FD interest rates to lure depositors into investing in it. The interest rate offered by banks on its FD depends upon many factors. Therefore, there is no direct relation between the interest rate offered on fixed deposit and the CRISIL rating. But the score provides an insight into the degree of the safety which financial institution offers to the investors.
CRISIL provides an objective and unbiased assessment of a financial firm’s ability for timely repayment of funds. It helps investors in making decisions while investing in company’s fixed deposit scheme and avail FD benefits.
Hence, it is apparent that the CRISIL Rating System is a yardstick or a measuring tool to assess the financial strength of a company. An investor must see the CRISIL rating, along with other features of a firm before investing in its FD.
