Thesis Report

on
Credit Rating Analysis: A Case on Credit Rating
Information and Services Limited

Submitted by:
Name: Muntasir Kabir
ID: BBA1501004053
Program: BBA
Major: Finance
Semester: Summer, 2019

Submitted to:
Department of Business Administration
Sonargaon University (SU)

Submitted for the partial fulfillment of the degree of BBA

Sonargaon University (SU)

Dhaka- 1215
Date of Submission: September 3, 2019
 Thesis Report
on
Credit Rating Analysis: A Case on Credit Rating
Information and Services Limited
Prepared by:
Name: Muntasir Kabir
ID: BBA1501004053
Program: BBA
Major: Finance
Semester: Summer, 2019

Prepared for:
Sanjana Hoque
Lecturer
Department of Business Administration
Sonargaon University (SU)

Submitted for the partial fulfillment of the degree of BBA

Sonargaon University (SU)

Dhaka- 1215
Date of Submission: September 3, 2019
 Letter of Transmittal
September 3, 2019
Sanjana Hoque
Lecturer
Department of Business Administration
Sonargaon University (SU)

Subject: Submission of Internship report

Dear Sir/Madam,
With humble honor and respect, I am submitting my internship report on “Credit Rating
Analysis: A Case on Credit Rating Information and Services Limited”. As per partial
accomplishment of the requirements for the BBA degree, this thesis has been carried out
under the supervision of you.

This report is an integral part of our academic courses in completion of the BBA program
which has given me the opportunity to have an insight into the (core part of topic). I hope this
report reflects on the contemporary issues on the finance area that are being practiced by
organizations in our country.

In completing the report, I tried my best to blend all my knowledge and imparted every
available detail and also attempted to avoid unnecessary amplification of the report.

I humbly request you to accept this report for your kind evaluation.

Sincerely,

___________________
Student’s Name: Muntasir Kabir
ID: BBA-1501004053
Department of Business Administration
Sonargaon University (SU)
 Student’s Declaration

I, the undersigned, a student of Business Administration, Department of BBA program,

Major in Finance of Sonargaon University do hereby declare that the internship report on
“Financial Performance of Bluebay Properties Limited”is the original one and has been
prepared by myself and has not been submitted anywhere for any degree, diploma, title or
recognition.

The report was prepared under the supervision of Lecturer Sanjana Hoque, Department of
Business Administration of Sonargaon University.

Yours Sincerely

…………………………..
Aniza Mushtaque
ID: BBA-1403003119
Bachelor of Business Administration Dept.
Sonargaon University.
 Letter of Authorization

Certified that this project report titled “Credit Rating Analysis: A Case on Credit Rating
Information and Services Limited” is the bona fide work of Muntasir Kabir, who carried
out the study under my supervision. Certified further that to the best of my knowledge the
work reported herein does not form part of any other project report or dissertation on the
basis of which a degree or award was conferred on an earlier occasion on this or any other
candidate.

…………………………
Sanjana Hoque
Lecturer
Department of Business Administration
Sonargaon University (SU)
 Acknowledgement
At first I want to express my deep gratitude to the Almighty, the most merciful for his
kindness to give me the ability to complete this report successfully. I extend my deep
gratitude to my supervisor Tania Rahman, Lecturer, Sonargaon University for his guidance,
suggestions, and encouragement for the preparation of this report. Without her guidance I
could not have finished this work on time. She provided me full support and ideas necessary
in analyzing the industry and thus to accomplish my goal. To conclude, I am also grateful to
all of the respected teachers of the Bachelor of Business Administration for their continuous
inspiration, assistance throughout these years.
 EXECUTIVE SUMMARY
Credit rating is an evaluation made by credit rating agency of the debtor’s ability to pay back
the debt and the likelihood of default. Over the year 2012 and 2013 , the number of credit rating
agencies (CRA) has increased by several folds, from only two in 2009 to eight 2013. As a result
the competition among the CRA’S for market share has become severe. As credit rating is very
sensitive to quality, this increase competition may lead to deteriorated or inflation rating by the
CRA’S to retain its clients and keep the cash flow unharmed.

There are several types of credit rating practiced all around the globe. Credit rating types can be
based on the subject matter of rating includes issues rating, issuer rating and sovereign rating.
Based on the tenure, credit rating can be divided into short term rating and long term rating.
other types of credit rating includes structure finance rating , mutual fund secure rating corporate
governance and stakeholder value addition rating , micro finance capacity rating and project
finance rating. Many of these types are not practiced in Bangladesh.

Credit rating plays a vital role in developing the financial market, regulating the financial
markets, estimating risk premium, enhancing transparency in the credit and fixed income,
security market and standardization of credit evaluation process. However there are some
drawbacks of the credit rating .These drawbacks include that credit rating can be biased. In the
absence of proper knowledge management by the credit rating companies changing the
concerned analyst of a rating assignment may lead to discrepancies and credit rating cannot be
treated as a standard measure to invest.

The history of credit rating in Bangladesh is very few. The first credit rating law was enforced
in 1996, followed by establishment of CRISL. In 2012 Bangladesh Securities and Exchange
Commission permitted two more credit rating agencies. There are credit rating agencies. By
2012, there are eight credit rating agencies operating in Bangladesh. This number is
significantly high compared to the number of credit rating agencies working all over the
world.

According to the business model followed by the credit rating agencies in Bangladesh a source
of business are the commercial banks implementing the BASEL 2.
 LIST OF ACRONYMS

BB Bangladesh Bank

SEC Securities and Exchange Commission

CRA Credit Rating Agencies

CRISL Credit Rating Information and Services Limited

WCRCL WASO Credit Rating Company (BD) Limited

CRAB Credit Rating Agency of Bangladesh

ECRL Emerging Credit Rating Limited

NCRL National Credit Rating Limited

ARCRSL Argus Credit Rating Services Limited

ECAI External Credit Assessment Institutions

IRC Internal Review Committee

ACRAA Association of Credit Rating Agencies in Asia

 Table of Content

Title Page (i)

Letter of Transmittal (ii)

Letter of Authorization (iii)

Acknowledgement (iv)

Executive Summary (v)

List of Acronyms (vi)

Chapter – 1 : Introduction

1.1 Introduction 1

1.2 Background of the study 2

1.3 Objective of the study 3

1.4 Methodology of the study 3

1.5 Limitations of the study 4

Chapter – 2 : Credit rating 5

2.1 Credit rating definition 6

2.2 Purposes of credit rating 7

2.3 Classification of credit rating 7

2.4 Importance of credit rating 8

2.5 History of credit rating 9

2.6 Credit rating industry in Bangladesh 10

Chapter – 3 : Credit Rating Information and Service Limited 13

3.1 Overview of Credit Rating Information and Service Limited (CRISL) 14

3.2 Mission and Vision 14

3.3 Historical background of CRISL 15

3.4 CRISL credit rating service 16

3.5 Other rating services of CRISL 17

3.6 CRISL rating process 17

3.7 Role of CRISL in bank loan rating 19

3.8 Mapping of CRISL rating with BB rating Grading 20

3.9 Implication of loan rating 20

3.10 Scope and limitation of CRISL rating 21

3.11 Performance of CRISL at a glance 21

3.11.1 CRISL sector wise rating distribution 21

3.11.2 Progress of CRISL rating 23

Chapter – 4 : Credit Rating Methodology of CRISL 25

4.1 Credit rating methodology of CRISL 26
4.2 Methodology for bank and financial instruction 26

4.2.1 Qualitative factor analysis 27

4.2.2 Quantitative factor analysis 29

4.3Long term bank and financial institution 31

4.4Short term-banks and financial institution 32

4.5 Rating methodology for corporate 32

4.6 Rating methodology for SME 33
4.6.1 Rating Scale of SME 33
Chapter – 5 : Impact of credit of CRISL 37

Chapter – 6 : Findings Recommendations and Conclusion 39