How do CRISIL ratings impact fixed deposits?
Formerly known as the Credit Rating Information Services of India Limited, CRISIL is one of the largest credit rating agencies in India. It offers a diverse range of services, trusted by different users since 1987. CRISIL ratings are a mark of trust and have been used by all kinds of debt instruments like term loans, bonds, debentures, securities, fixed deposits, etc.
The primary role of CRISIL ratings is to assess the above-mentioned instruments and understand whether the investors will have guaranteed payback of interest and principal on the same.
Types of CRISIL rating:
Since it is important to have a uniform rating across all credit rating agencies, the following symbols are used by CRISIL to rate the different fixed deposits:
- F AAA: Highest Safety
- F AA: High Safety
- F A: Adequate Safety
- F B: Inadequate Safety
- F C: High Risk
- F D: Default
At times, CRISIL ratings will also have different symbols like ‘+’ or ‘-‘ against their rating, which signifies added or diminished rating in the same category.
The impact of ratings on the depositors
Mostly, retired people look for fixed deposits as a safe instrument to grow their wealth. You don’t need to check the markets constantly or work on any investment strategy to have fixed deposits. However, if you are looking to plan your deposits in retirement, you need to take a look at the CRISIL ratings on your deposits.
The rating is a bond between the investor and the agency that the investment will have a positive return. It signifies the creditworthiness of the issuer of the security. The ratings also help to make up your mind regarding the risk involved against that particular instrument. If the rating suggests that the risk is minimal, it would be easier for the investor to invest.
There is a sort of an inverse relationship between CRISIL ratings and the fixed deposit interest rate. Fixed deposits that have a lower CRISIL rating tend to offer a higher interest rate to the depositors to make up for the higher risk involved. Whereas fixed deposits with a high CRISIL rating don’t need to compensate the depositors in such a way because their creditworthiness is high and hence there is lower risk.
The basics of investing
When it comes to retirement planning, you should always look for different avenues to grow your wealth. While keeping savings is important, you should also look at investments. While fixed deposits are a safe bet, you can also look for debentures, debt instruments and mutual funds, etc., to grow your wealth. All the debt-related instruments would always have a CRISIL rating, and this will help you decide an instrument based on the risk and returns involved.
The correct approach to investing
You should always spread your portfolio across all these types of instruments. This helps generate income from different avenues. You should also look for an online platform where you can directly invest in mutual funds, stocks, deposits, and pension schemes. When investing, make sure you are knowledgeable regarding everything that ties these investments.