Lecture 3.11 Credit Rating-Introduction
Lecture 3.11 Credit Rating-Introduction
BUSINESS
DEPARTMENT-MBA
Banking and Financial Services Management
20BAA-721
Chapter 3.3
Course Outcome
Blooms
Course
Description Taxonomy
Outcome Level
1 To demonstrate a comprehensive knowledge of the disciplines Understand/
of banking and financial services Remember
Source: www.economictimes.indiatimes.com
5 Design/Create
To structure and appraise the debt securitisation deals for the
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business
Credit Rating
• Investors get some idea about the degree of certainty of timely repayment
3
Credit Rating
• Credit ratings are not based on mathematical formulas.
• Instead, credit rating agencies use their judgment and experience.
• The credit rating is used by individuals and entities that purchase the
bonds
• A poor credit rating indicates a credit rating agency's opinion that the
company or government has a high risk of defaulting, based on the
agency's analysis of the entity's history and analysis of long term
economic prospects.
NEED FOR CREDIT RATING
Protect the interest of investors who can not into merits of the
debt instruments of a company.
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Who Evaluates Credit Ratings?
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TYPES OF RATINGS
• SOVEREIGN CREDIT RATING
A sovereign credit rating is the credit rating of a sovereign entity, i.e., a national
government. The sovereign credit rating indicates the risk level of the investing
environment of a country and is used by investors looking to invest abroad. It
takes political risk into account.
• Businesses and corporations that are looking to evaluate the risk involved
with a certain counterparty transaction also use credit ratings.
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Credit Score
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References:
• Economicdiscussion.net
• Onlinecourses.swayam.ac.in
• Khan M Y, “INDIAN FINANCIAL SYSTEM, Tata Mc Graw-Hill, New Delhi, 2001.
• Santhanam, B., BANKING AND FINANCIAL SYSTEM, Margham Publiations, Chennai.
• Swami, H. R, GUPTA, INDIAN BANKING AND FINANCIAL SYSTEM, Indus Valley Publication, 2009.
• Bhole L.M., (1998), Financial Institutions and Markets Structure, Growth and Innovations, 2nd Ed.
• Thorn, Richard S., (1976), Introduction to Money and Banking, New York, Harper & Row. 2. 3)Luckett, D.G.,
(1976), Money and Banking, McGraw Hill, New York.
• Ritter, L.S., and Sibler, W.L., (1977), Principles of Money, Banking and Markets, Basic Books, New York, 3rd
Ed.
• https://www.pdfdrive.com/indian-financial-system-and-management-of-financial-institutions-
d42675152.html
• https://www.pdfdrive.com/money-banking-and-financial-system-d39561701.html
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