A Guide to How CRISIL Rating Impacts a Fixed Deposit

A Guide to How CRISIL Rating Impacts a Fixed Deposit

While investing in a financial instrument, a pertinent concern for any investor is the risk involved. However, unlike other investment avenues, a fixed deposit (FD) is immune to market fluctuations and offers assured returns. Thus, if you are a conservative investor looking for a way to grow your wealth in the long term, a fixed deposit is your best friend.

However, even fixed deposits are not entirely risk-free. But a CRISIL rating can help you determine the risk associated with a particular financial institution. Read further to learn the importance of CRISIL ratings and how they can impact your fixed deposit.

What is a CRISIL Rating?

Credit Rating Information Services of India Limited (CRISIL) is a credit rating agency established in India. CRISIL offers a myriad of financial services including ratings that help borrowers and investors assess the feasibility of an investment instrument or a financier. The credit rating determines the issuer’s credibility by analysing multiple factors such as the debt repayment history, customer service, scope of expansion, liquidity profile, competition, etc.

Furthermore, you can find CRISIL ratings for a wide range of debt instruments including loans, fixed deposit, mutual funds, perpetual bonds, and more. You can read about the CRISIL ratings of different investment options and issuers on the official website of CRISIL.

The Importance of CRISIL Ratings

CRISIL is a reputed agency that provides trustworthy ratings to help investors decide the credibility of different investment instruments. It provides an unbiased and independent opinion on the security of a debt instrument. The CRISIL rating of any issuer or financial instrument is an analysis of the credit risks associated with them.

When selecting a bank for investing in an FD, choose the one with the high CRISIL rating. You can use these ratings as a benchmark to compare the different players in the market. Therefore, the CRISIL rating is a way to check the credibility of a bank before you make a long-term commitment!

How does CRISIL Rating Impact a Fixed Deposit Plan?

When it comes to choosing a financier to open an FD, you might gravitate towards a bank or NBFC that offers the highest interest rates. But did you know the CRISIL rating indicates the financier’s ability to pay interest and repay the principal on time? CRISIL rates a fixed deposit based on various aspects such as liquidity position, renewal rate, the issuer’s credibility, maturity of the scheme, etc. Thus, to mitigate risks and safeguard your finances, you must pick an FD with the highest CRISIL rating.

The CRISIL rating for a fixed deposit can range from FAAA to FD, with the former being the highest. Sometimes, you may also find the ‘+’ and ‘-‘ symbols attached to the ratings. For instance, a FAA+ rating is higher than an FAA-.

Hence, the credit rating plays a significant role and is a crucial parameter that must be considered while investing in an FD. Although these ratings don’t ensure repayment of your funds, they do ascertain the degree of default risk attached to them. These ratings are meant to guide you to make well-informed decisions!

The Bottom Line

So, if you are ready to begin your investment journey by opening an FD, make sure to check the CRISIL rating of your chosen financial institution. Go through all the parameters before zeroing in on any investment avenue and entrusting your funds with an issuer. Remember, investing your hard-earned money is profitable only if you do your homework!