If you want to know how many credit rating agencies are there in India and who regulates credit rating agencies in India, this article is for you.
It is quite common to confuse the functions of credit rating agencies and credit bureaus, as both rate creditworthiness. However, the major difference is that credit rating agencies focus on analyzing big companies and organizations, NGOs, state or local governments; whereas credit bureaus report the creditworthiness of individuals.
Apart from this, credit rating agencies rate from ‘AAA’ to ‘D’ while credit bureaus report credit scores which range from 300 to 900.
This section will talk about how many credit rating agencies are there in India. Here are the top 5 credit rating agencies functional in India -
Credit Rating Information Services of India Limited or CRISIL, an S&P Global company was started in 1987. It commenced its operations in January, 1988 making it one of the oldest credit rating agencies in India.
It covers automobile, industrial, financial, IT, media, travel, health, and retail sectors among others. CRISIL is headquartered in Mumbai, India but also operates in the USA, UK, Hong Kong, China, Argentina, and Poland.
ICRA Limited, formerly known as Investment Information and Credit Rating Agency of India Limited, was set up in 1991. Its headquarters are situated in New Delhi, and the international credit agency Moody's Investors Service holds the largest share in ICRA Limited.
It offers information and guides institutions as well as individual investors and creditors. It also assigns ratings related to performance, mutual funds, corporate governance, etc.
Credit Analysis and Research Limited (CARE) is a credit rating agency which has been operating in India since 1993. Headquartered in Mumbai, India, it provides ratings for manufacturing, infrastructure, and financial sectors. It also provides recovery ratings, independent credit evaluation of residual debt, public finance ratings, etc.
CARE Limited is a partner in ARC Ratings, an international credit rating agency, and has presence and subsidiaries in Nepal, Japan, Africa, and Russia.
India Ratings and Research Private Limited is a 100% owned subsidiary of the Fitch Group, recognized by both SEBI, and the Reserve Bank of India. Its headquarters are in Mumbai but it has offices in many cities all over India.
This agency provides timely credit opinions of financial institutions, both banking and insurance, as well as leasing companies and other corporations. It also covers urban local bodies, managed funds, structures finance, and project finance companies.
Infomerics is short for Integrated Financial Omnibus Metrics Research of International Corporate Systems, which is SEBI registered and accredited by the Reserve Bank of India. It is headquartered in Delhi, but has offices all over India.
It evaluates and rates the creditworthiness of banks, NBFCs, small and medium scale units, as well as large corporations. Apart from this, they also provide ratings for construction entities, engineering and management institutions, and Initial Public Offerings or IPOs.
Credit Rating Agencies assess, calculate, and report the creditworthiness of companies, enterprises, or organizations. It helps lenders and investors get an idea of the risk involved with investing or lending money to the entity.
They report creditworthiness in letters varying from ‘AAA’ to ‘D’, where the first is better than the latter. Here are the following letters and what they mean in terms of creditworthiness -
|
Credit Rating |
Interpretation |
|
AAA |
Highest safety and lowest credit risk |
|
AA |
High safety and low credit risk |
|
A |
Adequate safety and low credit risk |
|
BBB |
Moderate safety and moderate credit risk |
|
BB |
Moderate risk of default |
|
B |
High risk of default |
|
C |
Very high risk of default |
|
D |
Already defaulted or expected to default |
There are many types of credit ratings depending on how you classify them. Let’s look at the types of credit rating one by one -
According to the term, credit rating can be either short term credit rating or long term credit rating.
The first determines the probability of a borrower to default within one year. Long-term ratings indicate the probability of a borrower defaulting in the extended future. Generally, credit ratings are for medium to long term.
In this category, there are two major types of credit ratings - investment and speculative grade.
The first category proves that the corporation has good financial management and is at a lower risk. It shows that the borrower is most likely to pay off their financial obligations on time.
The speculative grade implies that a high level of risk is associated with the borrower. Entities that have this rating may find it difficult to get loans or may have to pay a higher rate of interest to get one.
Credit rating agencies play a major role for both companies and investors. In case you want to invest in a company, you would like to check the company’s financial conditions so you can be sure you won’t lose money.
Apart from this basic function, here are some roles of credit rating agencies in India -
Credit rating agencies play a major role by providing information to lenders and investors if their investment would be worthwhile.
There are quite a few credit rating agencies in India but the top 5 are mentioned in this article.
There are many credit rating agencies in India of which 5 are most popular, namely, CRISIL Limited, ICRA Limited, CARE Ratings Limited, India Ratings and Research Pvt. Ltd., and Infomerics Ratings Pvt. Ltd.
If you were searching for which of the following is not a credit rating agency, TransUnion CIBIL and Experian are not credit rating agencies. They are credit information bureaus, which generate credit scores for individuals.
Credit rating agencies in India are regulated by SEBI or the Securities and Exchange Board of India.
CRISIL Limited is the first credit rating agency of India and it started its operations in 1988.
No, SEBI is not a credit rating agency. SEBI stands for Securities and Exchange Board of India, which is the body that governs all credit rating agencies in the country.
A credit score is of 3 digits and signifies the creditworthiness of an individual. But a credit rating is a rank denoted by letters or a single digit, which shows the creditworthiness of a corporation, company, or enterprise.
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