Been looking at bonds on BondScanner and noticed the same bond sometimes shows two different ratings from two different agencies. One says CRISIL AA+ and another says ICRA AA. Are these equivalent? And how much should I actually trust these ratings – like does AAA mean the bond will definitely not default?
The notation is slightly different across agencies but the scale is the same. CRISIL and CARE use plain letters – AAA, AA, A and so on. ICRA puts them in brackets – [AAA], [AA], [A]. India Ratings uses IND AAA, IND AA. Functionally a CRISIL AAA and an ICRA [AAA] mean the same thing: highest credit quality, lowest probability of default. The bracket is just ICRA’s house style. On your second question – a AAA rating is not a guarantee. It is an opinion by a SEBI-registered agency on the probability of the issuer meeting its obligations. Historically AAA default rates in India are near zero, but DHFL was AA rated shortly before it collapsed. The rating is your starting point, not your ending point.
wait DHFL was AA when it defaulted? so AA literally means nothing?
It does not mean nothing, but it is not infallible. DHFL was rated AA by CARE as late as 2018. By 2019 it had defaulted. The issue was not that the rating methodology was wrong in theory – it was that the agency did not catch deteriorating asset quality and liquidity problems fast enough. Rating agencies get paid by the issuers they rate, which creates a structural conflict. SEBI has tightened this significantly in 2026 – agencies must now disclose issuer-paid fees, flag conflicts, and maintain public watch lists. But the conflict has not disappeared. The lesson from DHFL is not to ignore ratings, it is to read the rating rationale, track whether it is on watch or negative outlook, and not treat a letter grade as a final answer.
so what is the rating actually telling me then. like what’s the practical use of it?
The rating tells you where the issuer sits on the probability of default spectrum. AAA means near-zero historical default rate. AA means very low. A means low but measurable. BBB is the bottom of investment grade – below that is speculative territory. In India the four SEBI-registered agencies are CRISIL, ICRA, CARE, and India Ratings. All four are credible. Where they differ is in methodology and sometimes judgment of the same issuer. A split rating – CRISIL AA+ and ICRA AA for the same bond – is not unusual. When a split exists, treat the lower rating as the operative one.
okay so practically: read the rationale document, check if there is a watch or negative outlook, and if two agencies give different ratings go with the lower one?
that’s the right framework. also check when the rating was last reviewed. a rating assigned 18 months ago with no update is less useful than one reviewed last quarter. most agencies now publish monthly no-default statements for rated instruments. if an issuer is missing those or the agency is silent, that itself is a signal. the rationale is free on CRISIL, ICRA, and CARE’s websites. three pages that can save you from a poor decision.
To pull this together. The rating is a useful first filter, not a complete analysis. AAA means the agency believes default risk is minimal. It does not mean the issuer cannot deteriorate. The rationale, the outlook, the review date, and whether a split rating exists – those four things together give you a much more complete picture than the letter grade alone.