Banking or credit rating is an analysis of the credit risks associated with a financial instrument or a financial entity. It is a rating given to a particular entity based on the characters and the extent to which the financial statements of the entity are sound, in terms of borrowing and lending that has been done in the past. Usually, it is in the form of a detailed report based on the financial history of borrowing or lending and credit worthiness of the entity or the person obtained from the statements of its assets and liabilities with an aim to determine their ability to meet the debt responsibilities. It helps in assessment of the solvency of the particular entity. This rating is used by banks, financial institutions and investors to make a decision of investing money, buying bonds or giving loan or credit card. The better is the rating, more are the chances of getting money at payable interest rates. Bank credit ratings are estimates of how likely a bank is to default or go out of business.

Sruthy Santhosh

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