CRISIL (Credit Ratings and Information Services of India Limited) is one of the oldest credit rating agencies in India. Apart from its other functions, it rates bonds and hybrid instruments as well as short-term investment options including debt instruments like fixed deposits.
Since FDs are offered by various companies and financial institutions to diversify their funding sources, knowing if they are trustworthy is essential for you. Paying attention only to FD interest rates may not be the smartest move. So, checking the CRISIL Rating is the easiest way for you to ascertain whether you should invest in an FD with banks, financial institutions, private companies or NBFCs.
How does CRISIL rate FD programmes?
CRISIL rates FDs with a contracted maturity or tenor of more than one year on a specific rating scale. This CRISIL Rating for FD spans from FAAA to FD and allows you to choose the safest option with ease. CRISIL also rates short-term FDs offered by banks that mature in less than a year on a scale of CRISILA1+ to CRISIL A5.
Here is the CRISIL’s rating system for FDs that are offered for over a year:
- NM: Not meaningful
- FD: Default
- FC: High risk
- FB: Inadequate safety
- FA: Adequate safety
- FAA: High safety
- FAAA: Highest safety
It is in your best interest to select FDs with the high safety or highest safety ratings, FAA or FAAA, to ensure that your investment is stable and gives you guaranteed returns.
What are CRISIL Rating for FD based on?
CRISIL links an issuer’s FD offerings with its own credit rating and profile. It takes into consideration the issuer’s debt repayment profile and liquidity. Since these ratings take the credit profile of the issuer, they also check their financial obligation and thus their credibility in the market. These are the factors that are considered in CRISIL ratings to rate the FD from different NBFCs, private companies or banks.
- Liquidity of the issuer
- Maturity profile of the FD
- Renewal rate offered on the FD
- Granularity of the FD programme
All these factors together indicate the safety of your returns, whether it is the timely payment of interest (whether compounded in cumulative FDs or paid at regular intervals in non-cumulative FDs) or the return of the principal amount you have invested at maturity. These ratings can be considered as an assurance by you, helping your separate low-risk and how-risk FD programmes.
Not checking the ratings of an FD whose interest rates sound lucrative can be one of the biggest mistakes you make when investing in an FD. For instance, when you invest in FD from Bajaj Finance, you’ll see that it is rated FAAA/Stable.
Since it has the highest safety rating, you can invest in it without any fear of losing your invested amount and gain from high earnings of 8.40% to 8.75% on FDs for senior citizens. So, get started today and be aware of these CRISIL ratings before you sign up for an FD.