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Full Form of CRISIL

Updated on April 17, 2024
Article byRishab Nigam
Edited byRishab Nigam
Reviewed byDheeraj Vaidya, CFA, FRM

What is the Full-Form of CRISIL?

The full form of CRISIL is Credit Rating Information Services of India Limited. It is regarded as the global analytics business which services the financial markets and helps them function most transparently and efficiently. It believes in the principle of agile and innovation and provides solutions regarding data research and credit ratings.

Key Takeaways

  • CRISIL stands for Credit Rating Information Services of India Limited. It is a global analytics business that helps financial markets function transparently and efficiently. CRISIL values innovation and agility, providing solutions for data research and credit ratings.
  • CRISIL is India’s leading credit rating agency, and it operates under the umbrella of its parent organization, Standard and Poor’s. Utilizing a thorough rating rationale, CRISIL assists in assigning ratings to various entities.
  • It guarantees a decrease in information asymmetry and helps the firm and investors make better investment decisions.

History

  • In 1987, CRISIL was incorporated by ICICI and UTI. These two institutions additionally acted as the promoters of CRISIL.
  • In 1989, It provided ratings for the program of commercial papers. It was the first rating agency to do so.
  • Additionally, it was the first rating agency in 1992 to provide ratings for debt instruments of banks and financial institutions and asset-backed securities.
  • In 1992, it offered the assistance of technical nature to the Israeli Securities rating agency. It covered the location of Maalot and Malaysia Berhad.
  • To develop its skills and streamline its processes, it collaborated with Standard and Poors in 1996.
  • In May 2005, S&P acquired major stakeholdership of CRISIL, after which it was classified as the company of S&P.
  • It launched and brought in the concept of real estate star ratings in 2010.
  • In 2011, it further introduced ratings on education, solar grading, gold rating, and GILT index rating.
  • In 2012, it acquired a UK-based business that offered analytics services to global investment banks.
  • In 2013, it launched the CRISIL foundation, which works towards promoting financial awareness and efforts towards environment conservation. This initiative helped enhance financial literacy among business owners and prospective investors.
  • In 2015, it pursued the conservation of the environment by taking the help of the foundation and employee volunteers.
  • In the year 2014, it additionally rated the first mortgage-backed securities that were introduced in India.
  • In 2014, it launched its ratings on fund management’s capability for the mutual fund.
Full Form of CRISIL

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Functions

  • It has broad application in developing and providing comprehensive ratings.
  • It believes in excellence, teamwork, integrity, and accountability to drive an ethical business of ratings.
  • It serves business in eight countries: India, China, Hong Kong, Poland, Argentina, Singapore, the USA, and the UK.
  • Currently, it serves 86 countries, having a customer base of 100,000.
  • It reduces substantial levels of information asymmetry prevalent in the financial markets.
  • Therefore, as a credit rating agency, it provides necessary support to the consulting business, financial services, commercial and investment banks, insurance companies, asset management corporations, and private equity players.
  • It offers independent insights and opinions, which becomes a constructive solution.
  • It facilitates businesses to take up comprehensive and conclusive business and investment decisions.
  • It additionally helps small lenders to take up the right lending calls and allow them to make correct business decisions.
  •  The agency performs extensive due diligence and financial analysis to arrive at a comprehensive rating.
  • Due diligence may include gathering information from several research-based websites, followed by a meeting with the top management.

CRISIL Rating

  • The rating agency provides both long-term and short-term ratings.
  • The rating starts from AAA and ends with SD.
  • It provides credit ratings for long-term scale, short-term scale, structured finance, credit enhancement, fixed deposit scale, corporate credit scale, etc.
  • The agency’s rating rationale would focus on drivers that establish ratings, recent news, and developments and update business performance, credit factors, and key performance indicators.
  • To supplement the rationale, it provides financial commentary on the risk profile of a business.
  • The AAA rating is the highest order, indicating that the borrowers make timely payments. It ensures that the issuer makes timely payments.
  • The AA rating is the rating that indicates the instrument issued of low risk, and it makes timely payments on its due obligations.
  • The A rating is the rating that indicates the instrument issued of low risk and it has adequate safety with minor lapses in servicing obligations.
  • The BB rating is the rating that indicates that the instrument issued is of very high risk and may default.
  • The C rating is the rating wherein the instrument can be regarded as highly risky and has a high probability of default.
  • This rating of D indicates that the issuer of the financial instrument has defaulted on its due obligations.
  • SD rating also applies, indicating that the financial issuer has defaulted on the selective asset classes.

Effects

  • The rating offered by the CRISIL helps eliminate information asymmetry and adverse selection.
  • Information asymmetry arises when in a financial transaction between two entities, one entity holds more information than the other entity involved in the business or financial transaction.
  • Adverse selection arises when an investor invests in low-grade instruments.
  • The Ratings, therefore, raise the credibility of the borrower or the issuer of the financial instruments.
  • It helps investors make sound investments as they now access readily available information.
  • It also helps the issuer access funds from the financial markets at a lower cost.
  • Since the application of a good rating on the issuer raises its credibility, it also ensures that the default risk premium applied to the interest rates or finance costs is reduced considerably.
  • Default risk premium can be defined as the premium applied to the interest rate when the lender feels there are chances of default at the hands of borrowers.

Conclusion

This is the most popular credit rating agency in India. Standard and Poor’s is the parent organization of CRISIL. It helps in the allocation of ratings by employing its comprehensive rating rationale. This ensures the reduction of information asymmetry and helps the business and investors make better investment decisions.

Frequently Asked Questions (FAQs)

Is CRISIL ranking reliable?

For a comprehensive and detailed rating system, the CRISIL rating is highly dependable. They cover every possible variable, making it a popular choice among fund houses as one of their unique selling points.

Which CRISIL rating is best?

CRISIL ranks mutual funds based on their portfolio and fund’s NAV on a scale of 1 to 5. The agency ensures that the top 10 percentile of funds falls under rank one and the top 20 under rank 2 in each category.

Which organization is the leading promoter of CRISIL?

India’s first credit rating agency, CRISIL, was established on the 29th day of the month and promoted by ICICI Ltd, UTI, and other financial institutions. Mr. N Vaghul and another individual founded the company

How does CRISIL adapt to changing economic conditions?

CRISIL regularly updates its methodologies and analyses to reflect changing economic conditions and industry dynamics. This helps ensure that its ratings remain relevant and accurate.

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