Explained: Rating agencies’ fee structure for Credit Ratings

Credit Ratings are required to disclose the nature of their compensation arrangements and fee structure for bank loan/facility ratings on their websites. This disclosure is made under the Reserve Bank of India’s communication (dated April 26, 2013, reference no. DBOD.BP.No./5385/21.06.007/2012-13), advising accredited credit rating agencies (CRAs) to disclose the nature of their compensation arrangements and fee structure for bank loan/facility ratings on their websites.

The standard fee structure comprises an initial rating fee (IRF) at the initial rating exercise and an annual surveillance fee (ASF) subsequently for such time as the rating remains outstanding. Fee structures are documented in fee schedules which are communicated and finalized before initiating the rating assignment(s).

The Rating Agencies will, however, be free to decide their rating fees.  NSIC is the nodal agency that implements the performance and credit rating scheme for Small Scale Industries through its various branches/offices in the country.

The Rating Agencies have different fee structures for their rating of various clients including Small-Scale Units. The Rating Agencies will devise their fee structure for SSI units under this Scheme separately.

The cost of obtaining a credit rating for a company can vary depending on several factors, such as the credit rating agency you choose, the complexity of the company’s financial situation, and the depth of analysis required. Generally, the cost of a credit rating can range from a few thousand Rupees to tens of thousands of Rupees.

As per Acuite Ratings and Research Ltd, their standard fee structure for bank loan facilities is as follows:

a. IRF – 0.04% of the rated amount subject to a minimum of Rs. 40,000/-.

b. ASF – 0.025% of the rated amount per annum subject to a minimum of Rs.35,000/-.

ASF – 0.025% of the rated amount per annum subject to a minimum of Rs. 35,000/-. The fees are payable in advance i.e. before the commencement of the rating exercise. All fees are exclusive of GST and other applicable taxes.

Brickworks Ratings (BWR) ordinarily charge an Initial Rating fee of up to 0.1% of the issue size. The annual surveillance fee would range between 35% – 70% of the initial rating fee.

BWR shall ordinarily charge an Initial Rating fee of up to 0.1% of the issue size. The annual surveillance fee would range between 35% – 70% of the initial rating fee.

CRISIL offers detailed credit rating reports at a nominal cost of ₹1000 plus applicable taxes per report. Maximum 5 reports can be downloaded for the month

While the above fee structure represents the indicative fee payable by the clients, the actual fee amounts are determined (subject to appropriate internal approvals) by several factors including some group entities, the complexity of the assignment, etc.

ICRA’s rating fee is based on factors including the type, size, and complexity of the instrument/ debt obligation being rated. ICRA may consider using an alternative fee structure for volume issuers, groups or cluster-based require considerably greater analytical effort, ICRA reserves the right to charge a fee higher than that charged for require considerably greater analytical effort.

In case of rating of public debt issues, and bank facilities or commercial papers, the fee is paid by the issuer/borrower. The borrower/issuer has to pay the initial rating fee along with the signed rating agreement for the rating exercise. On acceptance of the rating, the borrower/issuer has to pay an annual surveillance fee every year till the debt is fully repaid. In case, the quantum of debt increases under the same borrowing program, the borrower/issuer has to pay an additional initial rating fee and additional annual surveillance fee for the incremental borrowing.

Rating fees for SSIs:

The Rating Agencies will, however, be free to decide their rating fees for SSI units which will be intimated to NSIC at the time of empanelment, so that the fee is well known in advance to the applicant unit as well as NSIC. The rating fees may, however, be reviewed by Rating Agencies from time to time due to the competition and the number/size of clientele.

Although the rating fee of different Rating Agencies may vary to subsidize the fee, a ceiling has been prescribed by the Government as per the table given below under Sharing of Fees.

Turnover Up to Rs.50 lakh 75% of the fee charged by the rating agency subject to a ceiling of Rs.25,000/-

Turnover above Rs.50 lakh to Rs.200 lakh 75% of the fee charged by the rating agency subject to a ceiling of Rs.30,000/-

Turnover above Rs.200 lakh 75% of the fee charged by the rating agency subject to a ceiling of Rs.40,000/-

The balance amount towards the fee shall be borne by the Small-Scale Units.

The portion of the fee to be subsidized by the Ministry shall be released through NSIC after the submission of the Rating Report to NSIC by the Rating Agencies.

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