CRISIL is a global analytics company that focuses on betterment on the functioning of markets. They provide credit rating to the companies and suggest whether a company is reliable on not. There are researches done by the company on the national and global level both focused on markets and economy. The ratings are provided by CRISIL to the companies in finance, structured finance, and corporate sector. For example, the ratings are FAAA, FAA, FA, FB, and FC for finance companies that give the credit rating to the FD related products. Companies like Bajaj Finance that have FAAA CRISIL rating are considered highly reliable for FD products as it is the highest rating. Similarly, other financial products and product categories of a bank or NBFC are also rated by the company.
Why Should You Consider Companies with High Credit Rating from CRISIL Before Making an Investment?
Credit rating is a very important aspect especially when it comes to investing your money on the basis of it. They determine if your money is safe with the bank or NBFC you are associated with. The credit rating companies analyze the company on the basis of the quality of management, the ability to service debt, financial risks, and business risks associated with the company. The CRISIL ratings are totally based upon the CRAMEL Model. The model focuses upon:
●C: Capital Adequacy- the capital of a bank/NBFC, is analyzed to know if it is enough to withstand any financial emergencies.
●R: Resource Raising Ability- The resources of a company are analyzed based on profit-making capabilities and available resources.
●A: Asset Quality: In this parameter, the management of credit risks is analyzed of a particular company.
●M: Management and System Evaluation: The factors like competence, risk appetite, Systems, and goals are assessed in this parameter.
●E: Earning Potential: The stability, diversity and the level of earnings are assessed under this parameter.
●L: Liquidity (Management of asset and liabilities): The quality and quantum of available liquid assets are assessed in this parameter to determine the risks of interest rates and liquidity.
Even though these rating can fluctuate even during the course of your investment they are an important aspect of decision making when it comes to investing in a financial product. The financial products of all grades are offered by numerous banks and NBFCs in the market. It is important to ensure that your money is safe with that company and it is capable of providing you with the promised returns. It is important that you go with the financial company with best credit rating to ensure safe and profitable investments.
The finance experts suggest that even if the money is always invested in a particular financial product and the rating of that company falls, you should withdraw your investment. This should be done even after the withdrawal expenses involved as there are chances of more expenses and losses in the long term if the money continues to be invested there. If a company has a high rating, then it suggests that there is more safety of your investments and based on the interest rates by the company are also affected. The revisions in credit ratings suggest whether there is stability in a company’s structure and reliability or not. This again is an important factor on which your decision should be based.