Agencies in India and Their Role: An entity’s creditworthiness is evaluated by a credit rating agency (CRA) in relation to a specific debt or financial obligation. A person’s credit score or a company’s or government entity’s credit rating indicates how creditworthy they are. These organisations assist investors and lenders in letting them assess the possible risk of providing money to a specific borrower and assessing the borrower’s ability to repay the loan based on previous credit behaviour. SEBI (Securities and Exchange Board of India) authorises and controls all credit rating firms in India. India has seven credit rating companies, among them CRISIL, ICRA, CARE, India Ratings and Research Pvt Ltd, Acuite Ratings & Research, Brickwork Ratings India Pvt. Ltd. and Infomerics Valuation and Ratings Pvt. Ltd that are authorised by SEBI to asses credit ratings. Similarly, we have four credit bureau of India.
Why is credit rating important?
A credit score is a three-digit figure that indicates a borrower’s creditworthiness. The credit bureau of India offers credit ratings in the form of numerical scores that range from anywhere between 300-800. The analysis of potential credit risks involved in providing a person or business with a financial instrument is known as credit rating. The ability of the borrower to repay the loan is assessed by the lender based on the borrower’s credit score. The rating is given based on a person’s or a business’s creditworthiness and credentials. A person’s or a business’s creditworthiness is assessed in light of previous lending and borrowing activities. After analysing the assertions of liabilities and assets as well as their capacity to repay debt, credit ratings are established. It is advised that you keep up a decent credit score if you are going to apply for a huge loan in the future.
List of Indian Credit Rating Companies
The following seven Indian credit rating companies are authorised and registered with SEBI:
1. Credit Rating Information Services of India Limited (CRISIL): One of the first and top credit rating agencies in India was founded in 1987 and is called Credit Rating Information Services of India Limited (CRISIL). In addition to India, it is functioning 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, organisations, and institutions to assist investors in making knowledgeable investment decisions. CRISIL also entered the infrastructure rating market in 2016.
2. Investment Information and Credit Rating Agency of India (ICRA) Limited: Another top credit rating agencies in India is the Investment Information and Credit Rating Agency of India, which was founded in 1991 and has its headquarters in Mumbai; it uses a clear rating system to provide comprehensive credit ratings to corporations. Corporate governance ratings, mutual fund ratings, structured finance ratings, performance ratings, etc., are all given by ICRA.
3. Credit Analysis and Research (CARE) Limited (CARE): They began conducting business in April 1993, and its regional offices are located 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, one of the top credit rating agencies in India, offers ratings for. Investors can utilise 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.
4. Acuite Research & Ratings: Acuite Rating & Research, which was founded in 2011, was formerly known as Small Medium Enterprises Rating Agency Of India Limited. SME Ratings and Bond Ratings are its two main divisions. It assesses the legitimacy of current MSMEs.
5. Brickwork Ratings India Private Limited: Besides being registered with SEBI, Brickwork Ratings (BWR) is also accredited by RBI and empanelled by NCD, NSIC, MSME ratings and grading services. Canara Bank is their leading promoter and strategic partner. It assigns credit ratings to bank loans, capital market instruments, municipal corporations and SMEs. It also grades real estate investments, NGOs, hospitals, MFI, etc. It provides several rating systems depending on the different
6. India Ratings and Research Pvt. Ltd: Determines credit ratings for corporate issuers, managed funds, financial institutions, project finance companies, structured finance companies, and urban local bodies. The company was formerly known as Fitch Ratings India Pvt. Ltd. With Mumbai serving as its corporate headquarters, and it also has branch offices in Ahmedabad, Chennai, Delhi, Hyderabad, Bengaluru, Pune, and Kolkata.
7. Informational Rating and Valuation Pvt. Ltd: Infometrics Valuation and Rating Pvt Ltd is a credit rating company that has received RBI accreditation and SEBI registration. It was founded by former financial experts, bankers, and employees of administrative services. It provides a fair evaluation of the creditworthiness of banks, non-bank financial institutions (NBFIs), small and medium-sized businesses (SMUs), and major corporations. It aims to reduce any knowledge disparity between lenders and investors.
How do credit rating firms operate?
Ratings are given to organisations, people, or other entities after analysis by credit rating agencies. One must know that the credit bureau of India and credit rating agencies are not the same. These organisations have the power to evaluate businesses, state governments, non-profit organisations, nations, securities, local governmental entities, and enterprises created for a specific purpose. When determining a rating, a number of variables are taken into account, including financial statements, the type of debt, borrowing and lending history, payback capacity, previous credit repayment behaviour, and more. Each of these elements plays a specific role in determining the final outcome, the credit score.
The top credit rating agencies in India, as mentioned above, instead give the report and other inputs that make it easier for the lender to analyse and make a judgement about whether to grant a credit facility to an organisation.
What role do credit rating agencies play in India?
Individuals, small enterprises, major corporations, and non-profits of all sizes are all evaluated and given credit ratings by organisations like top credit rating agencies India, as given above.
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 behaviour, etc.
In addition to a company’s credit rating, they provide additional information to help lenders and investors analyse and make wise lending and investment decisions. Better credit ratings indicate a lower default risk for lenders, which may make it easier for a business to obtain finance more quickly and at better interest rates.
So what we are saying is,
A credit rating is a quantitative indicator of a person’s or a company’s creditworthiness. An important factor that can make or break a loan application is the credit rating. The credit rating or score serves as an indicator of the borrower’s reliability and whether he has a history of making late payments on loans. Only four of India’s six credit bureau of India—CIBIL, Experian, Equifax, and CRIF High Mark—provide individual credit reports at the moment. All of these are approved by the Reserve Bank of India and offer thorough reports to people looking for a summary of their credit history and score.
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