GK and Current Affairs List of Credit Rating Agencies in India – Significance & Role

List of Credit Rating Agencies in India – Significance & Role

350

Credit Rating Agencies in India

A Credit Rating Agency (CRA) is an institution that evaluates and assesses an individual’s or a company’s creditworthiness. SEBI is the regulator of credit rating agencies in India. CRA is a company that assigns credit ratings, which rate a debtor’s ability to pay back debt by making timely principal and interest payments and the likelihood of default. In this article, we discuss about various credit rating agencies in India.

CRISIL, ICRA, CARE, Fitch Ratings India PVT LTD(India Ratings and research), ONICRA, SMERA, Brickwork Rating India PVT LTD, Equifax Credit Information Services PVT LTD(ECIS), Trans Union CIBIL, Hunter Fraud Score, Experian India. The ratings given to securities are mostly represented as AAA, AAB, Ba3, CCC etc up to D. The highest rating AAA(Prime) is given to a borrower who has the highest probability of paying back.

List of Credit Rating Agencies in India and Headquarters

1. Credit Rating Information Services of India Limited (CRISIL)
Name of Rating Agency	Year of Establishment	Headquarters
CRISIL	1987	Gurgaon, India
CRISIL is India’s first credit rating agency, with a market share of more than 60%. It was promoted by ICICI Ltd, UTI, and other financial institutions. In 1988, it commenced its operations. In 1995, in partnership with National Stock Exchange, CRISIL developed CRISIL500 Equity Index. CRISIL’s businesses operate from 8 countries: the USA, Argentina, Poland, the UK, India, China, Hong Kong, and Singapore. In 1996, it allied with the Standard & Poor’s (S&P) Ratings Group and in the next year, Standard & Poor’s (S&P) Ratings Group acquired 9.68% shares in it.
2. Investment Information and Credit Rating Agency of India (ICRA)
Name of Rating Agency	Year of Establishment	Headquarters
ICRA	1991	Mumbai, India
It is India’s second credit rating agency. It was promoted by the Industrial Finance Corporation of India (IFCI), and other leading financial/investment institutions. ICRA originally named as Investment Information and Credit Rating Agency of India Limited (IICRA India) is independent and professional investment information and credit rating agency in India.
3. Credit Analysis & Research Limited (CARE)
Name of Rating Agency	Year of Establishment	Headquarters
CARE	1993	Mumbai, India
CARE is India’s third Credit Rating Agency. It commenced its operations in April 1993. It was mainly promoted by IDBI along with Canara Bank, UTI, and other financial and lending institutions. It offers credit ratings in the following areas: Debt ratings, Bank loan ratings, Issuer ratings, Corporate governance, Recovery ratings, Financial sector, and Infrastructure ratings.
4. Acuite Ratings & Research (earlier SMERA Ratings Limited)
Established in 2011, earlier known as Small Medium Enterprises Rating Agency Of India Limited is now known as Acuite Rating & Research. It has two key divisions – Bond Ratings and SME Ratings. It evaluates the credibility of existing MSMEs (Micro, Small, and Medium enterprises). Exclusively for Micro, Small and Medium Enterprises in India. However, it has grown over the years to provide ratings to SMEs as well as to mid and large corporate in India. It is a joint initiative of SIDBI, Dun & Bradstreet India and leading banks in India.
Small and Medium Enterprises Rating Agency of India Limited (SMERA)
Name of Rating Agency	Year of Establishment	Headquarters
SMERA	2005	Mumbai, India
SMERA is a credit rating agency in India that was set up for micro, small and medium enterprises (MSME). It was established in 2005 by SIDBI, Dun & Bradstreet Information Services India Private Limited (D&B), and some chief banks in India. In 1999, SMERA has been registered under the Securities and Exchange Board of India and is only the sixth rating agency in India to rate issues such as IPO, bonds, commercial papers, security receipts, and others. As an external credit assessment institution (ECAI), the Reserve Bank of India (RBI) accredited SMERA to rate bank loan ratings under Basel II guidelines.
5. Brickwork Ratings India Private Limited
Name of Rating Agency	Year of Establishment	Headquarters
BWR	2007	Bangalore, India
Brickwork Ratings is a credit rating agency in India which was established in 2007. It is also accredited by the Reserve Bank of India (RBI) and empaneled by NSIC. It offers Bank Loan, NCD, Commercial Paper, MSME ratings, and grading services. It also plays a significant role in the grading of real estate investments, hospitals, educational institutions, tourism, NGOs, IREDA, MFI, and MNRE. BWR is responsible for rating bank loans, municipal corporations, a capital market instruments, financial institutions, SME’s and corporate governance ratings.
6. India Ratings and Research Pvt. Ltd. (Ind-Ra)
Name of Rating Agency	Year of Establishment	Headquarters
Ind-Ra	1995	Mumbai, India
Formerly known as Fitch Ratings India Pvt. Ltd., determines credit ratings for corporate issuers, financial institutions, managed funds, project finance companies, structured finance companies, and urban local bodies. Headquartered in Mumbai, it also has other branch offices in Ahmedabad, Chennai, Delhi, Hyderabad, Bengaluru, Pune, and Kolkata.
7. Infometrics Valuation and Rating Pvt. Ltd.
Name of Rating Agency	Year of Establishment	Headquarters
–	1986	New Delhi, India
Founded by former finance professionals, bankers, and administrative services personnel, Infometrics Valuation and Rating Pvt Ltd is an RBI-accredited and SEBI registered credit rating agency. It offers an unbiased assessment and evaluation of the creditworthiness of banks, non-banking financial companies (NBFCs), small and medium scale units (SMUs), and large corporates. It aims to reduce any kind of information asymmetry amongst lenders and investors. It has transparency as its core value and thus, endeavors to provide accurate and comprehensive reports and credit ratings to all its clients.

Fitch India: India Ratings and Research(Ind-Ra) covers corporate issuers, financial institutions, banks, insurance companies, urban local bodies, structured finance, and project finance. It is recognized by SEBI, NHB, RBI. It completely owned under Fitch Group.

ECIS: Subsidiary of Equifax US. It is a joint venture of Equifax US and UBI, SBI, Bank of Baroda, Bank of India, Kotak Mahindra, Sundaram Finance and Religare. Also provides Basic or Enhanced consumer information report, Equifax alerts, and Microfinance institution credit information.

Experian Indian: First to receive the license to the new Credit Information Companies (Regulation) Act (CICRA) 2005.

BWR: Promoted by Canara Bank. It offers ratings of bank loans, SMEs, corporate governance rating, municipal corporation, a capital market instrument, and financial institutions. Also grades NGOs, tourism, real estate investments, hospitals, IREDA, educational institutions, MFI.

Significance of Credit Rating Agencies

These agencies determine the risk that is associated by investing in the companies.
This aids in making Informed Investment Decisions. Credit Ratings give a fair estimate of the ability of the organisations to fulfill their financial commitment.
A high credit rating indicates a high possibility of paying back the loan.
The Credit Rating of organizations also helps the lending institutions in deciding the loan eligibility of the their borrower.
The increasing levels of default resulting from easy availability of finance, is another factor that has led to the growing importance of the Credit Rating.
Credit Rating also plays a vital role in financial markets. They assess the credit risk of the corporate or government borrowers by analyzing the relevant information available regarding the borrower and its economic circumstances. This analysis is reflected in Credit Rating. This rating represents an opinion about the likelihood of meeting the financial obligations by the borrower.

Role of the Credit Rating Agency

The credit rating agencies rate the creditworthiness of issuers of debt obligations, of debt instruments, and in some cases, of the services of the underlying debt. The debt instruments rated by CRAs include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, and collateralized securities, such as mortgage-backed securities and collateralized debt obligations.

A credit rating is an evaluation of the credit risk of a prospective debtor. Also, predicting their ability to pay back the debt, along with this, makes a forecast of the chances for the debtor defaulting. The credit rating represents an evaluation of a credit rating agency of the qualitative and quantitative information for the prospective debtor, including information provided by the prospective debtor and other non-public information obtained by the credit rating agency’s analysts. Credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments.