Crisil Ratings has revised its rating scale for fixed deposit (FD) programmes to align it with the 20-point long-term rating scale (AAA to D) prescribed by Securities and Exchange Board of India (SEBI).

SEBI had issued circulars on July 16, 2021, and April 1, 2022, advising credit rating agencies (CRAs) to align their rating scales by June 30, 2022, with those prescribed by respective financial sector regulators or authority, or in their absence, follow what’s prescribed by SEBI (refer to table 1 in the annexure for the rating scales).

Crisil Ratings is in the process of migrating its existing ratings on FD programmes to the revised scale from its erstwhile 14-point rating scale (FAAA to FD). This migration represents only a recalibration of the rating from one scale to another and does not reflect any change in the credit risk profile of the rated FD programme.

It is neither an upgrade nor a downgrade of the rating of the FD programme.

There is a strong linkage between the rating of the FD programme of an issuer and its credit risk profile, as reflected in its long-term credit rating or issuer rating. The credit rating reflects the fundamental credit quality and factors in the funding sources (including FDs), debt repayment profile and liquidity of the issuer. In general, the rating on the FD programme will be the same as the issuer rating. This is because FDs are ranked pari passu with other senior debt instruments.

Crisil Ratings may, however, map the rating on the FD programme of banks¹ a notch higher than the issuer rating. This factors in banks’ access to systemic liquidity, RBI’s regulatory oversight over banks including efforts to safeguard interests of depositors, and deposit guarantee provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a certain quantum.

The mapping framework for banks will also take into account the ownership pattern of the bank (public or private sector banks) and the quality of the FD programme reflected in parameters like granularity and maturity profile of the FD programme.

Crisil Ratings is in the process of migrating its outstanding FD ratings in line with the regulatory timelines.

Please refer to Crisil’s criteria for rating fixed deposit programmes for further details.

¹ Scheduled Commercial Banks