CRISIL is one of the most trusted rating agencies that rates financial institutions and companies on a variety of criteria. This agency rates hybrid instruments and short-term investment options including debt instruments. CRISIL has a separate rating scale and criteria for fixed deposits based on a detailed mapping framework. It evaluates whether an issuer can repay your invested funds and the interest component it has earned, without any default. It rates every FD issued by banks, private companies, and NBFCs, thus making it easy for you to decide whom to choose to invest with.
So, if you are planning to invest in fixed deposits, you must check the CRISIL rating of the issuer to ensure that you are making a wise investment. To understand why CRISIL ratings are so important, first, learn about the 7 factors that affect CRISIL ratings for FDs making them stringent and thus dependable.
- Issuer’s long-term credit rating
- Issuer’s funding sources
- Issuer’s debt repayment profile
- Issuer’s liquidity
- Issuer’s FD programme granularity
- Issuer’s FD maturity profile
- Issuer’s FD renewal rate
Based on these factors CRISIL ratings for company FDs have 14 ratings going from FD (default), the lowest on the scale, to FAAA, the highest on the scale. Here’s a snapshot of the CRISIL scale for company FDs:
- NM- Not Meaningful
- FD- Default
- FC- High risk (With FC+ and FC- variants)
- FB- Inadequate safety (With FB+ and FB- variants)
- FA- Adequate safety (With FA+ and FA- variants)
- FAA- High safety (With FAA+ and FAA- variants)
- FAAA- Highest safety
When you’re comparing different FDs in the market, choose an FD that has a rating of FAA or FAAA as this promises you that the issuer is credible and that you will receive your principal amount as well as your interest earnings on time and without fail. Even if you see an FD with a higher interest rate but with a low rating, be mindful of the fact that this FD may not be a good option for you in the long run.
Thus, CRISIL’s FD ratings allow you to compare various issuers’ FD offerings with one quick look and help you choose the right FD easily and quickly. So, before investing in a company FD, check the CRISIL ratings. The higher the rating, the safer your investment is.
