Page 227 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes
Example: An automaker may operate a subsidiary that offers financing for the purchase
of a new vehicle, similar to the loan plans offered by a local bank or credit union. This arrangement
would be considered consumer financing, since the purchased automobile is not intended for
use in a business operation, but as a pleasure vehicle for an individual owner.

Self Assessment

Fill in the blanks:
11. The lending process occurs between the ………………….. and a lender.
12. ………………….. can include just about any type of lending activity those results in the
extension of credit to a consumer.
13. In ………………….. the lender extends secured and unsecured loans to consumers who
wish to purchase automobiles, homes, or engage in other activities.
14. Consumer finance has to do with the ………………….. process.
15. In consumer finance the lender may be a bank or ………………….. .

10.6 Summary

 A credit rating estimates the credit worthiness of an individual, corporation, or even a
country.
 It is an evaluation made by credit bureaus of a borrower's overall credit history.
 Credit ratings are calculated from financial history and current assets and liabilities.

 A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain
types of debt obligations as well as the debt instruments themselves.
 In some cases, the service providers of the underlying debt are also given ratings.

 In most cases, the issuers of securities are companies, special purpose entities, state and
local governments, non-profit organizations, or national governments issuing debt-like
securities (i.e., bonds) that can be traded on a secondary market.
 A credit rating for an issuer takes into consideration the issuer's credit worthiness (i.e., its
ability to pay back a loan), and affects the interest rate applied to the particular security
being issued.
 The credit rating agencies are regulated by the Securities and Exchange Board of India. The
main credit rating organizations in India are CRISIL, CARE, DCR India and ONICRA.
 Consumer finance has to do with the lending process that occurs between the consumer
and a lender. In some instances, the lender may be a bank or financial institution.

 In retail banking, the lender extends secured and unsecured loans to consumers who wish
to purchase automobiles, homes, or engage in other activities that require substantial
financing, such as remodeling a home.
10.7 Keywords

Rating: An opinion regarding securities, expressed in the form of standard symbols or in any
other standardised manner, assigned by a credit rating agency and used by the issuer of such
securities, to comply with a requirement specified by these regulations.

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