Understanding ICRA Ratings in Fixed Deposits

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While Fixed deposits (FDs) are considered a safe savings avenue, it is important to choose the right financial institution to ensure your deposit remains secure.

ICRA fixed deposit ratings play an important role by helping you get a clear assessment of the creditworthiness of the institution offering FDs.

Understanding ICRA Ratings

ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) was established in 1991. It is a professional and independent investment information and credit rating agency.

ICRA provides ratings by examining factors such as cash flow, liquidity, and financial flexibility. That’s how the ICRA fixed deposit rating plays a vital role in identifying credible FD issuers. Seeing the rating, you can make informed financial decisions.

ICRA Ratings of FD-providing Banks and NBFCs

ICRA ratings can help you reduce credit risk, ensuring you get interest payout and initial deposit on time. Here are the ICRA fixed deposit ratings for some of prominent banks and NBFCs:

Company	ICRA Fixed Deposit Rating
Bajaj Finance	[ICRA]AAA (Stable)
Mahindra Finance	[ICRA]AAA (Stable)
Shriram Finance	[ICRA]AA+ (Stable)
HDFC Bank Limited	[ICRA]AAA (Stable)
Sundaram Home Finance Limited	[ICRA]AAA (Stable)
ICICI Home Finance Company Limited	[ICRA]AAA (Stable)
RBL Bank	MAA (stable) (medium-term FD program) [ICRA]A1+ (short-term FD program)

Note: These ratings are subject to change at the discretion of ICRA.

Significance of ICRA Ratings for Fixed Deposits

It’s important to know the ICRA ratings for fixed deposits to ensure the safety of the funds you deposit in an FD. Here are some reasons how these can be helpful:

Help identify the issuer’s credibility, ensuring that they provide reliable service to investors, issuers, intermediaries, and regulators

Ensure transparency in the money and capital market and help in standardisation

Provide a ranking of the probability of default loss of the investment instrument

Can be used by intermediaries like investment bankers to set the price and marketing strategies
Can be used by regulators to provide benchmarks and rules for the financial market

How ICRA Ratings Impact the Investors

Here are a few ways in which ICRA Ratings can impact your investment decisions:

Supporting Smart Investment Choices

ICRA ratings help you assess a company’s financial health, making it easier to identify stable investment options. This reduces your exposure to risk and aids in building a balanced portfolio.

Boosting Investor Assurance

Higher ICRA ratings indicate lower risk, giving you confidence in your investment decisions. It helps you avoid high-risk investments and invest more prudently.

Evaluating a Company’s Credit Strength

Companies with high ICRA ratings are seen as financially reliable and more likely to meet debt obligations. This increases their attractiveness for investment and improves their access to better credit terms.

Fostering Transparency and Trust

ICRA ratings are conducted independently, ensuring a clear and unbiased assessment of a company’s financial standing. This transparency builds trust, helping you make informed investment decisions.

1. ICRA’s Long-term Rating Scale

Rating	Meaning	Risk
AAA	Highest degree of safety	Lowest credit risk
AA	High degree of safety	Very low credit risk
A	Adequate degree of safety	Low credit risk
BBB	Moderate degree of safety	Moderate credit risk
BB	Moderate risk of default	Moderate credit risk
B	High risk of default	High credit risk
C	Very high risk of default	Very high credit risk
D	Defaulting or are expected to default soon	Very high credit risk

2. ICRA’s Short-term Rating Scale

Rating	Meaning	Risk
A1	Very strong degree of safety	Lowest credit risk
A2	Strong degree of safety	Low credit risk
A3	Moderate degree of safety	Higher credit risk
A4	Minimal degree of safety	Very high credit risk
D	Defaulting or expected to be in default on maturity	Very high credit risk

For the rating categories, certain modifiers like + (plus) or – (minus) may be added to the ratings. These indicate a relative position of the rating in its category.

Limitations of ICRA Ratings

ICRA ratings are simply the relative ranking of the investment’s credit risk. Some of the limitations are:

ICRA ratings categorise debt obligation with similar but not identical credit risks
ICRA ratings focus on credit risk, not other risks like interest rate changes or fluctuations in the markets
Even though ICRA incorporates all essential factors, the risk parameters assessed can be inaccurate
All ICRA ratings are subject to regular monitoring, so you should check for updates on the official website