What is the Rating of Debt Securities?

RATING OF DEBT SECURITIES : Rating is an opinion on the future ability and legal
obligation of the issuer to make timely payments of principal and interest on a specific
fixed income security. The rating measures the probability that the issuer may default on
the security over its life, depending on the instrument, may be a matter of few days to 30
years. In addition, long term rating incorporates an assessment of the expected monetary
loss should a default occur. Rating of debt instruments means an expression, through the
use of symbols, of the opinion about credit quality of the issuer of the security. It does not
amount to any recommendation to purchase, sell or hold that security. It is concerned with
an act of assigning values by estimating worth or reputation of solvency and honesty so as
to repose the trust in person’s ability and intention to repay.