Debt Instrument Rating

RECENT ARTICLES

RBI Monetary Policy: Pause continues with slightly more hawkishness
read more

Jul-23 External Trade: Gyrating Deficit
read more

Jul-23 Inflation: Shocking, but not to the core
read more

Jun-23 IIP: A Mixed Bag
read more

Jun-23 Trade: Lower imports keep deficits in control
read more

Structured Finance Ratings

Rating Scale

Rating Process

Long-term structured finance instruments: Instruments with original maturity exceeding one year

Ratings	Definition
ACUITE AAA (SO)	Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
ACUITE AA (SO)	Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
ACUITE A (SO)	Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
ACUITE BBB (SO)	Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
ACUITE BB (SO)	Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations.
ACUITE B (SO)	Instruments with this rating are considered to have high risk of default regarding timely servicing of financial obligation
ACUITE C (SO)	Instruments with this rating are considered to have very high likelihood of default regarding timely payment of financial obligations.
ACUITE D (SO)	Instruments with this rating are in default or are expected to be in default soon.

Acuité may apply '+' (plus) or '-' (minus) signs for ratings from 'ACUITE AA SO' to 'ACUITE C SO' to reflect comparative standing within the category.

Short term structured finance instruments: Instruments with original maturity of up to one year

Ratings	Definition
ACUITE A1 (SO)	Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligation. Such instruments carry lowest credit risk.
ACUITE A2 (SO)	Instruments with this rating are considered to have strong degree of safety regarding timely payment of financial obligation. Such instruments carry low credit risk.
ACUITE A3 (SO)	Instruments with this rating are considered to have moderate degree of safety regarding timely payment of financial obligation. Such instruments carry higher credit risk as compared to instruments rated in the two higher categories.
ACUITE A4 (SO)	Instruments with this rating are considered to have minimal degree of safety regarding timely payment of financial obligation. Such instruments carry very high credit risk and are susceptible to default.
ACUITE D (SO)	Instruments with this rating are in default or expected to be in default on maturity.

Acuité may apply '+' (plus) sign for ratings from 'ACUITE A1 (SO)' to 'ACUITE A4 (SO)' to reflect comparative standing within the category.

All different rating criteria are available on http://acuite.in/rating-criteria.htm

Structured finance ratings fall into two broad categories:

Retail Securitisation
Credit enhancement through Structured Obligation (SO)

Acuité has the capability to assign ratings on retail securitisation transactions either in the form of pass through certificates (PTC) or direct assignments (DA). Typically, the originator in such transactions is an NBFC or HFC which lends to retail or SME borrowers. The pools sold to the investor or to the bank are analysed to model the likely losses and arrive at the credit enhancement necessary for a specific rating level in case of PTC transactions. For DA assignments, a loss estimate report is prepared for the banker.