How reliable are CRISIL ratings for fixed deposits?

CRISIL is one of the oldest agencies managing credit ratings in India. It rates both long-term and short-term investment options like fixed deposit and hybrid capital instruments. It observes a specific ranking system and considers several metrics while estimating an issuer. For instance, they believe the liquidity of an issuer, the maturity profile, the renewal rates, and the granularity of their FD programme to rate the FDs offered by different banks, NBFCs or companies.

As an investor, checking the CRISIL ratings is one of the most vital parameters for you based on which you can decide on the right FDs. Here’s why the CRISIL rating is a reliable system basis which you can take an informed decision about fixed deposits.

  • Helps in measuring debt repayment capacity

The CRISIL rating for FDs is based on the liquidity of an issuer and their records in returning the principal and paying out the earnings. So, you can view the rating and gauge whether your chosen issuer, be it a bank or company, is in a position to return your entire maturity sum as promised at the end of the tenor. Based on the ranking system of FAAA to FD, ensure that you don’t choose an issuer with the FD tag as this means the issuer is a defaulter. Conversely, pick an issue with the FAA or FAA rating, as this means they are disciplined and have the funds they need to fulfill their obligations.

  • Helps in analyzing the safety of your deposits
    Even though FDs are not market-linked and promised guaranteed returns, many issuers may default on their promise and you may lose your investment to malpractice. It is not possible for you to gauge the tendencies of your issuer, so observe the CRISIL ratings given to an issuer’s FD offering to deduce their behavior. This is especially important if you are investing in a long-term fixed deposit. This is because you need to be assured that under any circumstances you will not lose your hard earned money. If the FD CRISIL rating of your issuer is on the lower side then there is a higher risk involved. It may be possible that such an investment may result in you losing not only the interest but also your principal. However, if the ranking is on the higher side, there you can rest assured that the issuer will pay you your entire maturity amount on time and without any hassle.
  • Helps in your decision-making process
    CRISIL’s rating system for FDs that are offered for over a year are categorized as:
    NM: Not meaningful

FD: Default

FC: High risk

FB: Inadequate safety

FA: Adequate safety

FAA: High safety

FAAA: Highest safety.

It is needless to say that you should select FDs with the high safety or highest safety ratings, FAA or FAAA, to ensure that your investment is safe and gives you guaranteed returns. A CRISIL rating realistically points out issuers who are timely with their interest payouts. This will help you choose the right issuer rather than be misled with hugely high-interest rates. It will especially help you if you are choosing non-cumulative FDs and want to access the interest earnings periodically as a regular income.

Take a prudent decision by choosing to invest in FDs with the highest CRISIL rating and a higher interest. This will not only help maximize your returns from fixed deposits but will also ensure your invested sum is secure. To make an informed choice, you can invest in FDs that come with highest CRISIL rating of FAAA/stable like Bajaj Finance FDs. Moreover, you can benefit from a high interest of up to 8.75% on cumulative FDs for at least 36 months as a regular investor and up to 9.10% on the same FD as a senior citizen.

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