What is ICRA rating system? Know its impacts on fixed deposits

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Before investing your savings in a company FD, verifying your issuer’s financial stability is vital. This ensures that your investment is a successful one and your money is parked in safety. While word of mouth is a good starting point, it isn’t sufficient to make a wise decision. To get an objective analysis on your NBFC FD, inspect the ratings that reputed credit rating agencies attach to it.

Agencies like ICRA evaluate details like the company’s track record and its risk management system before passing a judgement on the FD’s reliability. So, before you choose your FD, learn more about the ICRA rating system and how it affects your fixed deposit.

ICRA and the structure of its rating system

ICRA Limited is a credit rating agency that provides financial services that help investors and creditors make smart financial decisions. To guide investors, ICRA provides credit rating scales that evaluate the reliability of investment instruments. Let’s take a look at the credit rating structure for fixed deposits.

The following is ICRA’s medium-term rating scale for fixed deposits.

MAAA: ICRA’s highest credit quality rating. This is a big green signal for your investment. It implies that the FD carrying this rating has the lowest credit risk.

MAA: ICRA’s high credit quality rating. It means that you can go ahead with your FD investment, however its safety is one rung below the first.

MA: ICRA’s adequate credit quality rating. If the FD you are considering has this rating then you should tread a little cautiously as the investment comes with some risk that may arise due to certain fluctuations in the future.

MB: ICRA’s inadequate credit quality rating. This rating should set off alarm bells. It indicates that there is high risk involved in this investment.

MC: ICRA’s risk-prone credit quality rating. FDs with an MC rating come with a very high risk potential. Chances of default are high and it is better to reconsider going ahead with this investment option.

MD: ICRA’s lowest credit quality rating. FDs carrying this rating have very low recovery prospects. Going ahead with this FD implies keeping your finances in a volatile environment subject to jeopardy.

Additionally, ICRA attaches plus (+) or minus (-) modifiers to the symbols to indicate relative ratings. For example, MAA+ ranks higher than MAA and MAA- ranks lower than both.

How ICRA arrives at these ratings

Before giving a rating, ICRA surveys the financial institution and subjects their instrument to in-depth study. That is why these ratings are so valuable. The factors ICRA evaluates include the following.

  • Strengths and weakness of the financial institution and the investment instruments offered by them.

  • The institution’s track record and its customer service.

  • Financial flexibility of the institution.

  • The policies and laws set by the local/country government.

  • Market for the investment instrument and existing competition.

  • Technology used in operation structures in order to manage risk.

  • Scope for expansion and current management team.

Having learnt about how to choose a reliable fixed deposit, invest your finances with an NBFC that scores well with ICRA like Bajaj Finance. The Bajaj Finance Fixed Deposit carries an ICRA rating of MAAA which means that your finances are safe with this issuer. Here, you not only get reliability, but also enjoy high returns.

Bajaj Finance offers new customers an FD interest rate of 8.75% on an FD taken for 36 months and senior citizens up to 9.10% interest return. Moreover, with Bajaj Finance you can choose a tenor of your choice ranging up to 60 months and you can opt for regular interest payouts too. Determining your ROI is simple when you use the Bajaj Finance FD calculator and keeping tabs of your investment is convenient when you make use of the online account management facility. Get started with this safe and high-revenue-yielding fixed deposit by investing online today!

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