Credit Rating Agency (CRA) is an entity which assesses the ability and willingness of the issuer company for timely payment of interest and principal on a debt instrument. It measures the financial strength of companies. The rating is intended to get fair idea of risk associated while providing credit to a company. Higher is the credit rating, lower is the risk associated with the investment.
A CRA assigns credit rating to the entities like companies, NGO, state governments, countries, securities, local government bodies etc. The investor can take sound investment decisions based on the analysis of these ratings.
The three prominent credit rating agencies are:
These three have global market share of 95%.
In India CRA are regulated by SEBI. The leading credit rating agencies in India are:
Rating is based on comprehensive evaluation on strength & weaknesses of company fundamentals. It includes financial analysis, in-depth study of industry, macroeconomic regulator and political environment. Ratings are generally denoted by symbols like AA+, A+, B-, BB- etc.
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