Page 253 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Financial Institutions and Services

Notes 4. Preparation of a rating report, assigning a rating and sending the copy of the report to the
company and NSIC. As the last step of the rating process, the rating report is prepared.
Under this report, the rating is assigned and copy of the same is sent to the company as
well as the NSIC for further use of the prospective investors.

Rating Scale

Your rating will reflect two components, Financial Strength and Performance Capability. Ratings
will be assigned on the following rating scale:

Financial Strength
Example:
High Moderate Low
Performance Highest SE 1A SE 1B SE 1C
Capability
High SE 2A SE 2B SE 2C
Moderate SE 3A SE 3B SE 3C
Weak SE 4A SE 4B SE 4C
Poor SE 5A SE 5B SE 5C

A company with high Performance Capability and high Financial Strength will be rated 'SE2A',
while one with weak Performance Capability and low Financial Strength will be rated 'SE4C'.
17.3 Credit Rating Agencies

As we all know, credit rating agencies are registered and regulated by the Securities and Exchange
Board of India. The following is the eligibility criteria for an individual to be registered as a
credit rating agency:
1. the applicant is set up and registered as a company under the Companies Act, 1956;
2. the applicant has, in its Memorandum of Association, specified rating activity as one of its
main objects;
3. the applicant has a minimum net worth of rupees five crores. Provided that a credit rating
agency existing at the commencement of these regulations, with a net worth of less than
rupees five crores, shall be deemed to have satisfied this condition, if it increases its net
worth to the said minimum within a period of three years of such commencement.
4. the applicant has adequate infrastructure, to enable it to provide rating services in
accordance with the provisions of the Act and these regulations;

5. the applicant and the promoters of the applicant, referred to in regulation 4 have
professional competence, financial soundness and general reputation of fairness and
integrity in business transactions, to the satisfaction of the Board;
6. neither the applicant, nor its promoter, nor any director of the applicant or its promoter,
is involved in any legal proceeding connected with the securities market, which may have
an adverse impact on the interests of the investors;
7. neither the applicant, nor its promoters, nor any director, of its promoter has at any time
in the past been convicted of any offence involving moral turpitude or any economic
offence;
8. the applicant has, in its employment, persons having adequate professional and other
relevant experience to the satisfaction of the Board;

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