Credit Rating
An agency's opinion on an issuer's ability to meet its debt obligations, expressed on a letter scale.
How it is identified
Scale in India runs AAA, AA, A, BBB, BB, B, C, D, with plus and minus modifiers within categories
Unit
qualitative
In depth
A rating is an opinion about relative default probability, not a guarantee and not a recommendation, and agencies say so explicitly. The structural problem is that the issuer pays for its own rating, which creates a conflict that has been implicated in ratings staying too high for too long — several Indian issuers were rated investment grade weeks before defaulting. Ratings are also slow to change, so the market price of a bond often moves well before the rating does. The rating scale is a starting filter, and the credit spread the market demands is usually more informative than the letter.
Worked example
A bond rated AA is downgraded to BBB after a default in a group company. The bond had already traded down from ₹980 to ₹810 over the preceding month — the market repriced the risk first and the rating followed.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Credit Rating” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.