In India, the creditworthiness of organizations and other institutions is evaluated by credit rating agencies (CRA). These organizations evaluate a debtor’s credit risk and ability to repay the obligation. The SEBI (Credit Rating Agencies) Regulations, 1999 of the Securities and Exchange Board of India Act, 1992, govern all credit rating agencies in India.
There are various CRA that work under the Indian government and has the charge to assess and generate credit scores and reports for the borrowers. But do you know which agencies undertake this complete process? Well, in this guide, we’ll mention every piece of information related to the top credit rating agencies in India. So, let’s get started with it!
What is a credit rating agency?
A credit rating agency rates various entities as borrowers based on their repayment ability using a range of metrics and factors. These organizations don’t rate individuals, and the rankings are expressed as letters like AAA, CCC, etc. People who invest in or lend to these organizations take significantly higher risks because the amount they borrow can reach hundreds and crores.
Therefore, with the aid of these credit ratings, lenders or investors can make wiser choices regarding organizational borrowers, such as:
State governments
Local governmental bodies
Companies
Special purpose entities
Non-profit organizations
How does a credit rating agency work?
Ratings are given to organizations or other entities by credit rating agencies. Companies, state governments, non-profit organizations, nations, securities, special purpose entities, and local governmental bodies are among the entities that credit rating agencies rate. Before assessing an entity’s credit, credit rating agencies take into account a number of variables, including the financial statements, level and kind of debt, lending and borrowing history, ability to repay the loan, and the entity’s prior debts.
After a credit rating agency rates the entities, it gives the investor additional information, which the investor then analyses and uses to make wise investment decisions. A bad credit rating suggests a high probability of default for the entity. The entities’ credit ratings are used as a standard for financial market regulations. On the basis of thorough examination, credit ratings are released by organizations like Moody’s Investors Service and Standard and Poor’s (S&P).
Top 5 CRA in India 2022
Listed below are the top 5 CRA in India that you must know:
Credit Rating Information Services of India Limited (CRISIL)
Credit Rating Information Services of India Limited (CRISIL) is one of the oldest and first credit rating companies in India, founded in 1987. In addition to India, it functions in the UK, the USA, Poland, China, Hong Kong, and Argentina. It assesses a company’s creditworthiness based on its strengths, market standing, market share, and board. It provides credit ratings for businesses, organizations, and institutions to assist investors in making knowledgeable investment decisions. Moreover, CRISIL also entered the infrastructure rating market in 2016.
Investment Information and Credit Rating Agency of India (ICRA) Limited
The Investment Information and Credit Rating Agency of India was founded in 1991 and has its headquarters in Mumbai. ICRA uses a clear rating system to provide corporations with thorough credit ratings. Corporate governance ratings, mutual fund ratings, structured finance ratings, performance ratings, etc., are all given by ICRA.
Credit Analysis and Research (CARE) Limited
In April 1993, Credit Analysis and Research Limited (CARE) started operating in India. Its regional offices are in New Delhi, Kolkata, Pune, Chandigarh, Ahmedabad, Jaipur, Bengaluru, Coimbatore, Chennai, and Hyderabad, in addition to its Mumbai headquarters. Short-term and long-term debt instruments are the two categories of bank loans that CARE offers ratings for. Investors can utilize its credit ratings to make educated decisions based on expectations for the risk-return trade-off and credit risk. Additionally, it can aid businesses in obtaining the funding they need for investments.
Brickwork Ratings (BWR) India Private Limited
Brickwork Ratings (BWR) is not only registered with SEBI but also accredited by RBI, impanelled by NCD, NSIC, and MSME ratings and grading services. Its principal promoter and strategic partner is Canara Bank. It assigns credit ratings to municipal companies, SMEs, capital market instruments, and bank loans. Additionally, it assesses real estate ventures, NGOs, medical facilities, MFIs, etc. It offers a variety of rating systems based on various financial metrics.
Indian Rating & Research Private Limited
India Rating & Research Private Limited is a fully owned subsidiary of the Fitch Group. It provides credit ratings for corporate issuers, project finance, banks, insurance companies, financial institutions, corporate issuers, finance and leasing firms, etc. In addition to SEBI, this company is recognized by both the Reserve Bank of India and the National Housing Bank.
Conclusion
Indeed, credit rating agencies are the lifeline of the companies that provide credit to individuals, companies, organizations, etc. A lot of factors are taken into account before rating a firm, including financial statements, the type and quantity of debt, lending and borrowing history, debt repayment capacity, prior credit payback behavior, etc.
Better credit ratings indicate a lower risk of default for lenders, which may make it easier for a business to obtain financing more quickly and at a lower interest rate. Credit ratings assigned to corporations serve as the foundation for financial market regulations and are essential for smooth functioning between the borrower and the lender.
FAQs
A credit rating agency evaluates the financial health of businesses and other governmental organizations. They aid investors in determining the risk and debt-paying capacity of the company.
A corporation, organization, or government body is granted a credit rating based on its capacity to pay back debt and the likelihood that is known as a credit rating. However, a credit score is given to a person after examining his credit history and repayment capacity.
The Securities and Exchanges Board of India (SEBI) controls and regulates all credit rating agencies in India. The SEBI keeps an eye on and evaluates credit rating agencies.
A very simple alphanumeric symbol, such as AA+, A-, etc., is used to indicate a rating.
The lengthy procedure of credit rating takes about 3–4 weeks to complete from the date of receipt.