Credit Rating Agencies in India : Practices and Performance

Contents: Preface. 1. Introduction. 2. A roadmap for the study. 3. Credit rating agencies in India. 4. Credit rating process and methodology. 5. Performance of credit rating agencies in India. 6. Working of credit rating agencies in India. 7. Summary of major findings suggestions and conclusion. Bibliography.

A large number of investors have invested a sizeable amount of their savings in the market and reaped a good return on investment. At the same time a number of investors have burnt their fingers even committed suicide as well. Because a number of companies either on account of loss suffered by them or market down turn yielded negative returns. A number of entitles defaulted in meeting financial obligations of payment of interest and the repayment of principal amount. During these days of complex and market driven economy the large size and so called reputation of companies are no longer a sufficient assurance of returns timely payment of interest and return of principal amount. There is a need for evaluating the fundamentals of issuer companies their prospects and associated risks before investing on their securities. Investment is a risk return balancing game.  Evaluation of risk associated with investments and management of risk is a difficult task. Evaluation of risk and its management to a greater extent depends upon the availability of complete and reliable information. Even if information is available it is highly difficult to understand and analyse the information to take informed investment decisions. There lies the significance of specialized market intermediaries who can assist the investors to make them understand the fundamentals of the company and market, and read in between the fundamentals of the company and market and read in between the lines of information. These export entitles are known as Credit Rating Agencies which perform the task of translating inexplicable risk into easily understandable rating/grading symbols. This work is an attempt to provide an insight into the working of Credit Rating Agencies in India.