A credit rating agency is equipped with all the required information to rate an entity (maybe an individual or an organization) based on its creditworthiness. These agencies provide highly essential risk assessment reports and analytical solutions and assign a definitive credit score to both individuals as well as organizations. This credit score reports are considered highly important for getting the loan. Not only the credit score but also certain documents are also needed for getting the loan. Now, let us have a look at the top most credit agencies of India placed in no particular order.
Year of Establishment | 2000 |
Headquarters | Mumbai, India |
Main Objective | The main function of CIBIL is to track the credit history of an individual or a company and rate their creditworthiness. |
Benefit | The CIBIL scores are used by lending organizations to sanction loans quickly and for the approval of credit cards too. |
Rating scale | Ratings vary between 350 and 900. Generally, a rating of above 700 is considered favorable. A high credit score allows consumers to avail all types of loans easily and at good interest rates. |
Year of Establishment | 1987 |
Headquarters | Gurgaon, India |
Main Objective | The main function of CRISIL is to establish the creditworthiness of companies based on the business strengths, the board, the market share, and reputation of the company and so on. CRISIL rates organization like public limited companies, banks and financial organizations and not individuals. |
Benefit | Allows investors to obtain a clear idea about an organization before investing in their debentures and bonds. |
Rating scale | CRISIL offers 8 different grades credit scoring. They are, 1. CRISIL AAA, CRISIL AA, CRISIL A – The three grades offer maximum safety for timely servicing of the loans. 2. CRISIL BBB, CRISIL BB – Offer moderate safety. 3. CRISIL B, CRISIL C, CRISIL D – High-risk individuals |
Year of Establishment | 1991 |
Headquarters | Mumbai, India |
Main Objective | ICRA offers 12 types of ratings which include, Corporate debt rating, Financial sector rating, Issuer rating, Bank loan credit rating, Public finance rating, Corporate governance rating, Structured finance rating, SME rating, Mutual fund rating, Infrastructure sector rating, Project finance rating and Insurance sector rating, |
Benefit | Comprehensive ratings offered through a transparent rating system. |
Rating scale | The ICRA rating system includes symbols that represent the ability of a corporate entity to service its debt obligations in a timely manner. The rating symbols vary with the financial instruments considered. |
Year of Establishment | 1993 |
Headquarters | Mumbai, India |
Main Objective | Offers a complete range of credit rating services that helps investors to make informed decisions and companies to raise capital. The company offers its credit rating and grading services in the following areas: Debt ratings, Bank loan ratings, Issuer ratings, Corporate governance, Recovery ratings, Financial sector, and Infrastructure ratings. |
Benefit | All services adhere to international quality standards thus ensuring maximum reliability. |
Rating scale | CARE offers two different categories of bank loan ratings, one for long-term debt instruments and the other for short-term debt instruments. 1. The short-term debt ratings are as follows and mentioned in the descending order of safety level for servicing loans appropriately. CARE AAA, CARE AA, CARE A, CARE BBB, CARE BB, CARE B, CARE C, CARE D. 2. The long-term debt ratings are as follows and mentioned in the descending order of safety level for servicing loans appropriately. CARE A1, CARE A2, CARE A3, CARE A4 and CARE D. |
Year of Establishment | 1993 |
Headquarters | Mumbai, India |
Main Objective | ONICRA credit assessment and scoring services for both individuals and businesses and is also a reliable employee background screening company. ONICRA also offers risk assessment reports and analytical solutions for individuals, MSME’s as well as for well-established corporate organizations. ONICRA grades the players in the education, healthcare and solar industries and provides a detailed assessment of each of the APMC. |
Benefit | Offers a holistic view of an individual or an entity and thus allows lenders and service providers to make value-based decisions. |
Ratings | Credit ratings for MSME’s are based on two factors: financial strength and performance capability. |
Year of Establishment | 2005 |
Headquarters | Mumbai, India |
Main Objective | SMERA compromises of two main divisions: SMERA Bond Ratings and SMERA SME Ratings. The first division was started in 2011 and is responsible for the credit assessment of issuers of bonds, debentures and fixed deposits. The SME rating division of SMERA rates MSME’s, all types of bank facilities, renewable energy and services companies, micro-finance institutions and other vendors. |
Benefit | Accredited by the RBI, SMERA is home to a strong team of finance professionals. It is a body of trust and excellence that helps the different entities to control risk efficiently |
Ratings | The bank loan ratings offered by SMERA can be summarised as AAA – Highest Safety, Lowest Credit Risk AA – Highest Safety, Very Low Credit Risk A – High Safety, Low Credit Risk BBB – Moderate Safety, Moderate Credit Risk BB – Moderate Risk, Moderate Risk of Default B – High Risk, High Risk of Default C – Very High Risk, Very High Risk of Default D – Default / Expected to be in Default soon All ratings are preceded by “SMERA”. |
Year of Establishment | 2007 |
Headquarters | Bangalore, India |
Main Objective | Brickwork Ratings takes up the responsibility of rating bank loans, municipal corporation, capital market instrument, financial institutions, SME’s and corporate governance ratings. It also grades initial public issue by a company and is one of the very few credit agencies that play a significant role in the grading of real estate investments, hospitals, educational institutions, tourism, NGOs, IREDA, MFI and MNRE. |
Benefit | Organizations rated higher by this SEBI registered credit agency can easily negotiate lower interest rates and enjoy higher valuations. The ratings and grade services offered by Brickwork help the investor to obtain relevant information in totality. |
Ratings | Brickwork Ratings rates the different financial instruments using its signature rating scale that starts with “BW” and is followed by unique rating symbols. |
Year of Establishment | 2010 |
Headquarters | Mumbai, India |
Main Objective | Equifax India is a subsidiary of Equifax US and was formed a joint venture between the parent company and seven prime financial institutions in India (UBI, SBI, Bank of Baroda, Bank of India, Kotak Mahindra, Sundaram Finance and Religare). Equifax India collects and processes financial information from all members and offers a whole range of credit assessment reports for individual consumers. The different types of reports provided by Equifax include Basic or Enhanced consumer information report, Equifax alerts and Microfinance institution credit information. |
Benefit | Consumer credit information establishes the creditworthiness of the individual and allows easy processing of loans by the bank and other financial institutions. |
Ratings | The Equifax Credit Score carries a numerical range between 280 and 850. The credit score can be defined as follows, a) Above 800 – Excellent. Highest safety. b) Between 750 and 800 – Very Good. High safety. c) Between 700 and 750 – Good. High Safety. d) Between 650 and 700 – Very Fair. Moderate Risk. e) Between 600 and 650 – Poor. High Risk. f) Lesser than 600 – Highest Risk. |
Year of Establishment | 2006 |
Headquarters | Mumbai, India |
Main Objective | Experian India consists of two companies, Experian Credit Information Company of India Private Limited (provides credit information) and Experian Services India Private Limited (provides relevant data for organizations to minimize risk and maximize revenue) |
Benefit | Experian India is equipped with outstanding analytical tools and data resources that make is an important entity of consumer economy in the country. |
Ratings | The Experian Credit Score carries a numerical range between 330 and 830. The credit score can be defined as follows, a) Above 800 – Excellent. Highest safety. b) Between 750 and 800 – Very Good. High safety. c) Between 700 and 750 – Good. High Safety. d) Between 650 and 700 – Very Fair. Moderate Risk. e) Between 600 and 650 – Poor. High Risk. f) Lesser than 600 – Highest Risk. |
Every credit rating agency has its unique approach to adding more value to the business world. These agencies play a critical role in determining one’s investment portfolio and facilitate the easier transaction of loans and credit cards. In short, credit rating agencies in India play a significant role in the overall economy of the country.
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At the start of 2020, the world was operating normally
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After smartphone penetration, people are not watching their SMS at all. They use SMS only for OTP related transactions. That’s it.
But What can a Lender see in your SMS after you consent to them?
Lender can see income, expenses, and any other Fixed Obligation like (EMIs/Credit Card).
1) Income – Parameters like Average Salary Credited, Stable Monthly inflows like Rent
2) Expenses – Average monthly debit card transactions, UPI Transactions, Monthly ATM Withdrawal Amount etc
3) Fixed Obligations – Loan payments have been made for the past few months, Credit card transactions.
It also tells the Lender the adverse incidents like
1) Missed Loan payments
2) Cheque bounces
3) Missed Bill Payments like EB, LPG gas bills.
4) POS transaction declines due to insufficient funds.
A massive chunk of data is available in our SMS (more than 700 data points), which helps Lender to make a credit decision.
An interesting insight on vehicle loans for lenders.
A trend we are seeing today – the first-hand vehicle ownership is decreasing with time. Why? People are upgrading their vehicles in every few years because of technological advances. And, this can be seen more with the millennial generation.
So, what should a lender do in terms of financing?
– Estimating the residual value of the vehicle at the start of the financing period.
– Charging a borrower only for the residual value (which is the difference between the value after a few years and the current value)
Example: A bike currently is INR 1 lakh. You want to buy the vehicle for 2 years. A lender will estimate the residual value of that bike today and what it would be after 2 years. If the estimated residual value = INR 45,000, the lender will charge you only that (say, INR 55,000 with interest for this instance) during your tenure.
At the end of 2-year period, you have 3 choices:
1. Return the bike and upgrade to a new one without going through the struggle of selling it.
2. Pay the lump sum remaining amount to own the vehicle outright.
3. Extend the financing and own it by keep paying the EMIs for the remaining amount of the vehicle for the next 12 or 18 months.
Benefits for the borrowers?
– Flexibility to use a vehicle and upgrade to a new one.
– Affordability to not pay for the complete value of the vehicle with the intention to use for a lesser amount of time.
– Convenience in owning the vehicle.
Say goodbye to the old lending option and embrace the new way of financing for vehicle by lenders!
How many of us know this?
1) Tiktok does Lending ( is it an entertainment company or social media company or a fintech company?
2) Youtube China does Lending
3) Top 100 internet companies in China(no matter what business they are in) do Lending
The team which was heading Lending in Tiktok was the Advertisement team. If we do Ads, we do X no of revenue. But if we do lending, we’ll get X+30% more revenue. This is on the same Ad spot.
Ad team has transformed into a lending team, and in today’s world, it’s possible because the subject matter expertise can be put in as an API and given to you.
Embedded Lending as a service is becoming popular in India too, and I am happy to be part of this ecosystem.
The answer is No. Only the top 10 crore people have access to many credit products in India. Almost all Banks focus on this market.
Once you go beyond that, the credit access rate has dropped significantly due to multiple factors.
1) Customers who are having low income(30-40K per month)
2) Not earning from an employer who belongs to Category A or B
3) Not from Tier 1 or 2 cities
NBFCs and Fintechs focus on the above segment, pushing another 10 crores of people.
But in India, 70 crores more people are formally or informally employed, which still needs to be tapped.
Ravi Kumar.C
August 23, 2017How was Banks Performance evaluated before CAMEL Rating ?????