The Indian economic factors have been fluctuating lately, leading to expectations that the RBI may change key interest rates. In such a market, investors are shifting toward corporate FDs from traditional FDs as they are providing a higher interest rate, leading to higher profits. However, traditional FDs are offered by banks, which makes them relatively safer than corporate FDs that companies offer. Investors analyse a company's creditworthiness to ensure it won’t default on interest payments and has the financial capacity to make regular interest payments. Here, they analyse creditworthiness based on third-party credit rating agencies such as CRISIL.

If you are looking to invest in corporate FDs, it is important to know how their interest rates are affected by CRISIL ratings. This blog will help you understand how CRISIL ratings affect FD returns. 

• CRISIL is a global analytical company that provides credit ratings, research, risk, and policy advisory services.
• It provides ratings, with the highest being AAA and the lowest being D.
• Based on the CRISIL ratings, investors can analyse the associated risk of default and invest accordingly.
  

CRISIL (Credit Rating Information Services of India Limited) is a global analytical company that provides ratings, research, risk, and policy advisory services. Founded in 1987 and headquartered in Mumbai, India, CRISIL is a subsidiary of S&P Global, one of the world’s leading providers of financial market intelligence. CRISIL rates almost all debt instruments by providing them ratings that range from AAA (highest credit quality) to D (default). Higher CRISIL ratings mean that the issuer has adequate financial capacity to provide regular interest payments with negligible risk of default. On the other hand, a lower CRISIL rating means that the investment may be risky with the risk of default. 

Contrary to popular belief that the CRISIL ratings are only limited to specific sectors, CRISIL rates all the debt instruments offered by service and manufacturing companies, including NBFCs and banks. The companies that CRISIL rates include government, private companies, partnerships, urban local bodies, etc. Furthermore, it rates instruments such as mutual funds, bonds, and infrastructure projects across India. 

Here is the role of CRISIL:

• Credit rating agency: CRISIL is one of India’s leading credit rating agencies, which assesses the creditworthiness of companies, financial institutions, and government entities.
• Research and analysis: The company provides in-depth research and analysis across multiple sectors, allowing investors to assess economic trends, industry performance, and market conditions.
• Policy advisory: CRISIL serves as a consultant to advise governments and regular bodies on various financial and economic policies. 

CRISIL executes extensive company research to analyse creditworthiness and provides ratings accordingly. Based on the CRISIL ratings, the issuer of instruments sets the interest rates on their instruments, which directly affects the returns that depositors can get. For example, if CRISIL has rated a company’s FD with a rating of D, the issuer will attach a higher interest rate to attractive investors as the FD is deemed risky.

Here are various CRISIL ratings and their meanings:

• CRISIL AAA: Highest credit quality with very low credit risk.
• CRISIL AA: High credit quality
• CRISIL A: Good credit quality
• CRISIL BBB: Average credit quality.
• CRISIL BB: Moderate risk of default.
• CRISIL B: High risk of default.
• CRISIL C: Very high risk of default.
• CRISIL D: Highest risk of default.

There is a relationship between interest rates and CRISIL ratings. If the CRISIL rating is high, the issuer offers lower interest rates as the risk is negligible. On the other hand, if the CRISIL rating is low, the issuer offers higher interest rates to attract investors to invest in risky investments. 

CRISIL ratings help people understand how likely a company is to pay back its debts, making it easier to decide whether to invest. They provide clear information about a company's financial health, helping build market trust.

CRISIL ratings assess the creditworthiness of banks and financial institutions offering FDs. Higher ratings, such as CRISIL AAA, indicate lower credit risk, meaning these institutions are more likely to honour their commitments to pay interest and principal.

CRISIL is one of India’s leading credit rating agencies that rates a host of assets and securities based on the issuer’s creditworthiness. Based on CRISIL ratings, investors can analyse the associated risk of default and invest accordingly.