How are the ratings given for INR bonds | Vested

How are the ratings given for Bonds?

Credit rating in bonds refers to an evaluation or assessment of the creditworthiness of the issuer of the bond. It's essentially a measure of the issuer's ability to repay the borrowed money and the likelihood of defaulting on the bond payments. The credit ratings such as CRISIL, ICRA, and CARE typically use a letter-based scale or alphanumeric symbols to denote different levels of creditworthiness. For example:

  • AAA: Highest credit quality, indicating extremely low risk of default.

  • AA: Very high credit quality, with a low risk of default.

  • A: High credit quality but with a slightly higher risk compared to the higher-rated categories.

  • BBB: Medium credit quality, with moderate risk.

  • Below BBB (BB upto D): Bonds with ratings below this level are considered speculative or "junk" bonds, carrying higher risk due to a higher likelihood of default.

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