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Presentation On

Credit Rating Agencies In India


ICRA Ltd.(Investment Information &
Credit Rating Agency)
 The ICRA Ltd. Has been promoted by IFCI at
New Delhi. It is an independent company Ltd
by shares with an authorised share capital of
Rs.10 crore against 5 crore is paid up. IFCI
holds 26%of the share capital &74% is
contributed by UTI, LIC,GIC,PNB,CBI, Bank
of Baroda,UCO Bank & HDFC Ltd.
Objectives Of ICRA
 To provide information & guidance to
institutional & individual investor.
 To enhance the ability of the borrower/issuers
to access the money market & the capital
market for large volume of resources from
investing public
 To assist the regulators in promoting the
transparency in the financial market.
Range Of Service Offered.
 Rating Services
 Information services

 Advisory Services

Rating Services Includes.


The other Services in the area of credit rating
include following………..
 Credit Assessment
 General Assessment
 Bank Lines of Credit Rating
 Credit Assessment For Small Scale & Medium
Scale Industries.
 Insurance Company Paying Rating.
Information Services Includes;
 Equity Grading
 Equity Assessment
 Corporate Review
 Money & Finance
 Investment Information Publications
 Corporate Reports
ICRA’S Rating Symbols
 Long Term Instruments, including
debentures/bonds/preference shares
 Medium Term Instruments Comprising
Certificate Of deposit
 Short Term Instruments Including Commercial
Papers
 Equity
CARE LTD.(CREDIT ANALYSIS &
RESEARCH IN EQUITY)
 CARE Ltd. Is a credit rating & information
services company promoted by IDBI jointly
with investment institutions, banks & financial
companies. The company started is operation in
October 1993 & announced its Ist rating in
1993.
CARE Range Of Services
 Credit Rating
 Information Services
 Equity Research
Other Services Includes…..
• CARE Loan Rating
• Credit Analysis Rating
• Interest Rate Structure Model
DUFF & PHELPS CREDIT RATING
 DCR Is the result of joint venture between the
international credit rating agency Duff &
Phelps & JM Financial & Alliance Group.
 DCR Symbols
• Long term & Medium term debt/instruments.
• Short term debt/instruments.
ONICRA(ONIDA INDIVIDUAL
CREDIT RATING AGENCY)
 ONICRA is the first individual credit agency in
India promoted by famous ONIDA group.
ONIDA covers approximately 75 million
households owning three popular items colour
TVs, refrigerators & washing machines.
ONICRA RATING SCALE
 ONICRA has been pioneer introduce the
concept of individual credit rating. It has
develop a rating system for various types of
credit extension by conducting in debt study of
all aspect the behaviour of credit seekers.
 The creditworthiness of the individual is
measured on various Parameters such as age,
qualification, occupation, savings, stability of
works and history of repayment etc.
ONICRA Rating Process
 ONICRA takes up the credit rating for
individuals at the request of lending institution.
 A lending institution writes to the ONICRA
whenever a potential customers visit the firm
for customers credit.
 The customers is required to fill in a prescribed
form.
 ONICRA uses 100 point scale to rate the
individual on various parameters
MOODY’S INVESTOR SERVICES
 Moody has stated following
instruments:
• Corporate bonds
• Municipal bonds
• Commercial papers
• Short term Municipal note
• Preferred stock
Performance of credit Rating Agency

 Reforms in the financial sector have greatly


enhanced the role of credit rating agencies.
CRISIL,ICRA & CARE, the three major rating
agencies are handling 90%-95%of the business of
credit rating. All of them are promoted by financial
institutions. Financial institutions while advancing
loans take the help of credit rating agencies to get
the company rated. All these agencies have
continued to expand their activities.
Conti…

 This has raised a big question mark as to procedure


or the methodology that these rating agencies follow
for rating. It has also been observed that companies
not satisfied with rating of one agency approach
another rating agency for better rating. Rating
process followed for rating has been found to be
defective. Rating agencies take in to consideration
only past & present performance & the projected
future performance is ignored.
SEBI REGULATIONS

 A credit rating agency shall make all efforts to


protect the interest of investors.
 A credit rating in the conduct of its business ,
shall observed high degree of integrity,
dignity & fairness in the conduct of its
business.
 A credit rating agency shall fulfill its obligation
in a prompt, ethical & professional manner.
Cont…

A credit rating agency shall at all times exercise


due diligence ensure proper care & exercise
independent professional judgment in order to
achieve & maintain objectivity.
 A credit rating agency shall have a reasonable &
adequate basis for performing rating evaluations,
with the support of appropriate & in depth rating
researches.
Cont…

 A credit rating agency shall have in place a


rating process that reflects consistent &
international rating standards.
 A credit rating agency shall not indulge in any
unfair competition nor shall it wean away the
clients of any other rating agency on
assurance of high rating.
 A credit rating agency shall disclose its rating
methodology to clients, users & the public.
Cont…

 A credit rating agency shall, wherever necessary,


disclose to the clients, possible sources of conflict of
duties & interest, which could impair its ability to
make fair, objectives & unbiased ratings.
 A credit rating agency shall not make any
exaggerated statement, whether oral or written, to
the client either about its qualification or its capability
to render certain services or its achievement with
regard to the services rendered to other clients.
Cont…
 A credit rating agency shall not make any untrue
statement, suppress any material fact or make any
misrepresentations in any documents, reports,
papers or information furnished to the board, stock
exchange or public at large.
 A credit rating agency shall ensure that the board is
promptly informed about any action, legal proceeding
etc.initiated against it alleging any material breach or
noncompliance by it, of any law, rules, regulations &
directions of the board or of any other regulatory
body.
Cont…

 A credit rating agency shall ensure that there


is no misuse of any privileged information
including prior knowledge of rating decision
or changes.
 (a) a credit rating agency or any of his
employees shall not render, directly or
indirectly any investment advice about any
security in the publicly accessible media.
Cont…

 (b)a credit rating agency shall not offer fee-


based services to the rated entities, beyond
credit ratings & research.