Monday, 25 November 2019

Unit 10: Credit Rating and Consumer Finance

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                                  Unit 10: Credit Rating and Consumer Finance   




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.

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.




Credit Rating and Consumer Finance Securitisation: Securitisation involves pooling assets together and turning them into a tradable Notes security.

In the case of loans it is pooling the receivables from a loan and then selling them to a third party.




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