Fitch Launches Outlook For Debt Ratings

Fitch Ratings India has introduced an outlook for debt ratings. Further, as Fitch India has became a wholly owned subsidiary of Fitch International, it has been decided to align the national rating scales and rating definitions with Fitch International usage.

The core definition of each rating category is now based on expectation of credit risk and capacity for timely payment.

The outlook will give an indicative direction on the likely rating over a period of time. This will help in the decision-making process, giving investors additional information when investing for long-term purposes, Fitch said.

At the same time, Fitch said a positive or a negative outlook does not imply that a rating change is inevitable.

 

Similarly, where rating outlooks are stable, there could be an upgrade or downgrade before an outlook moves to positive or negative should circumstances warrant such an action.

Fitch India has also introduced a new rating scale for term deposits. This follows term deposits -- including bank deposits and fixed deposits -- being on-tap retail debt programmes and thereby enjoying lower refinancing risk as compared to bonds and debentures.

Under a separate rating scale, the core definitions of each rating category remain the same, and the minimum investment grade for term deposits has been fixed at tA-(Ind).

Further, Fitch may use the symbol (M) after the rating to indicate that the market or non-credit risks of the debt instrument are not reflected in the rating.

A typical example is fully convertible debenture where the rating captures only the capacity for timely interest payment since the principal amount would be converted to equity based on prices in the stock market.

In addition, Fitch has aligned a few more minor changes in order to maintain consistency with its practices worldwide. These include national rating for rupee-denominated debt issued by a domestic issuer in India being denoted by the suffix '(ind)' as well as short term ratings being represented as F1+(ind) instead of Ind D1+.