The acronym CRISIL, or Credit Rating Information Services of India Limited, is one of the top credit rating companies in India. Based on a thorough evaluation of each entity's creditworthiness and financial stability, it rates different entities, including lenders. CRISIL takes into account numerous important variables when assessing lenders in India. The main factors or standards used by CRISIL to place lenders are as follows:
Financial Performance
By examining a lender's profitability, asset quality, capital sufficiency, and liquidity, CRISIL assesses its financial performance. The lender's financial statements, including the income statements, balance sheets, and cash flow statements, are examined as part of this examination.
Poonawalla Fincorp's rating has now been raised to CRISIL AAA by CRISIL Rating. Poonawalla, led by Abhay Bhutada, MD of the company, has an enhanced standalone profile, comprising consistent loan book growth, a wide range of product offerings, robust capitalization, improving earnings, and a good resource profile with low funding costs. This is reflected in the company's rating.
Loan Portfolio Quality
For the purpose of calculating a lender's credit rating, the quality of its loan portfolio is essential. The lender's asset quality, delinquency rates, non-performing assets (NPAs), and provisioning procedures are evaluated by CRISIL. A lender is more likely to get a good grade if their portfolio of loans is well-diversified and of excellent quality.
Risk Management Practices
The risk management structure and procedures of a lender are examined by CRISIL, along with its methods for evaluating credit risk, standards for underwriting, systems for monitoring risk, and methods for reducing risk.
Due to Muthoot Finance's effective expansion of its gold loan business and maintaining a solid financial risk profile, CRISIL increases the company's long-term debt rating to AA-positive. The rating of a lender is positively impacted by effective risk management procedures.
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Market Position and Business Profile
Within the Indian financial sector, CRISIL evaluates a lender's market position, competitiveness, and business profile. Market share, geographic reach, product variety, and consumer base are all taken into account. A lender with a dominant market share and a diverse customer base will probably be given a better rating.
Conclusion
The particular weighting given to each criterion may differ depending on the type of lender being assessed (such as banks, non-banking financial businesses, etc.) and the specific rating methodology used by CRISIL, which is crucial to note. To assure the validity and dependability of its ratings, the agency upholds an open and consistent rating methodology.
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