List of Credit Rating Agencies in India and their Functions

Credit rating agencies in India, including CRISIL, CARE, ICRA, SMREA and Brickwork Rating etc. Know about List of Credit Rating Agencies in India and their Functions

Table of Contents

Context: The government has criticised the ‘opaque methodologies’ used by the major global credit rating agencies to arrive at sovereign ratings.

About Credit Rating Agencies

Aspect	Details
Functions	Assess financial strength of companies and government entities, focusing on their ability to fulfill debt obligations. Provide essential information about issuers of bonds and debt instruments, including sovereign debts of countries.
CRAs in India	Seven registered agencies: CRISIL, CARE, ICRA, SMREA, Brickwork Rating, India Rating and Research Pvt. Ltd.
Global Credit Rating Industry	Dominated by three major agencies: Moody’s, Standard & Poor’s, and Fitch.
Credit Rating Scales	Use alphabetical symbols (AAA, AA, A, B, etc.) to rate creditworthiness of corporate financial instruments. AAA denotes high creditworthiness, while ratings below BB suggest poor credit quality.

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SEBI Regulations, 1999 for Credit Rating Agencies

Primary Regulation by SEBI: Credit rating agencies in India are primarily regulated by the Securities and Exchange Board of India (SEBI) under the SEBI Regulations, 1999, as part of the SEBI Act, 1992.
Additional Regulation by Other Agencies: Other regulatory authorities, including the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority, also govern specific aspects of credit rating agencies within their respective domains.
Disclosure-Based Regulatory Framework: The SEBI (Credit Rating Agencies) Regulations, 1999, require agencies to implement a disclosure-based regime.
- Agencies must publicly disclose their criteria for ratings, methodologies used, policies for default recognition, and approaches to handling conflicts of interest.

List of Credit Rating Agencies in India

Credit Rating Agency	Established	Headquarters	Key Services	Notable Information
CRISIL (Credit Rating Information Services of India Limited)	1987	Mumbai	Mutual funds ranking, Unit Linked Insurance Plans (ULIP), CRISIL coalition index, infrastructure rating.	Oldest credit rating agency in India, ventured into infrastructure rating in 2016, acquired 8.9% stake in CARE rating agency in 2017.
ICRA Limited	1991	Gurugram	Corporate debt, financial rating, structured finance, infrastructure, insurance, mutual funds, project finance.	Became a public entity in April 2007, subsidiaries include Consulting and Analytics, Data Services and KPO, ICRA Lanka, and ICRA Nepal. Largest shareholder is Moody’s Investors Service.
CARE (Credit Analysis and Research Limited)	1993	Mumbai	Corporate governance, debt, financial sector, bank loan, renewable energy, infrastructure.	Launched international credit rating agency ‘ARC Ratings’ with partners from Brazil, Malaysia, Portugal, and South Africa.
Brickwork Ratings (BWR)	2007	Bangalore	Bank loans, SMEs, corporate governance, municipal corporations, NGOs, tourism, educational institutions, financial institutions.	Sponsored by Canara Bank, accredited as an external credit assessment agency (ECAI) by RBI.
India Ratings and Research Pvt. Ltd.	Not specified	Not specified	Ratings for insurance companies, banks, corporate issuers, project finance, financial institutions, urban local bodies.	Fully-owned subsidiary of the Fitch Group, accredited by SEBI, RBI, and National Housing Bank.
Infomerics Valuation and Rating Private Limited	Not specified	Not specified	Analysis of creditworthiness for NBFCs, banks, corporates, SMEs.	RBI-accredited and SEBI-registered agency. Run under the leadership of Mr. Vipin Mallik.
Acuité Ratings & Research Limited	Not specified	Mumbai	Ratings for bank loans, securities, debt instruments, and facilities.	Registered with SEBI, accredited as an External Credit Assessment Institution (ECAI) by RBI under BASEL-II norms in 2012.

Role of Credit Rating Agencies in India

Credit Risk Assessment:
- Evaluate the creditworthiness of borrowers.
Issuer Credit Ratings:
- Assign ratings to issuers, indicating repayment likelihood.
Investor Guidance:
- Assist investors in assessing investment risks.
Market Transparency:
- Provide standardized, independent assessments for market trust.
Regulatory Compliance:
- Fulfill regulatory requirements for institutions and investors.
Risk Mitigation:
- Aid in managing and reducing investment risk.
Debt Issuance:
- Facilitate lower borrowing costs for entities issuing debt.
Market Development:
- Contribute to efficient capital allocation in financial markets.
SME Ratings:
- Assess and rate Small and Medium Enterprises for credit access.
Regulatory Oversight:
- Subject to SEBI oversight to ensure accuracy and reliability.
International Comparisons:
- Facilitate global investors in understanding Indian entities’ risk profile.

Criticism of Credit Rating Agencies in India

Conflict of Interest:
- Accusations of bias due to payment by rated entities.
Delayed Ratings Adjustments:
- Criticisms for slow adjustments, especially in economic downturns.
Over-Reliance on Historical Data:
- Overemphasis on historical data, neglecting current market dynamics.
Inadequate Risk Assessment:
- Failures in accurately assessing high-risk financial products.
Herd Mentality:
- Allegations of agencies following a “herd mentality.”
Lack of Transparency:
- Concerns about opaque rating methodologies and processes.
Pro-Cyclical Ratings:
- Accusations of ratings exacerbating economic downturns.
Rating Downgrades Impact:
- Criticism for significant impacts on markets and economies.
Limited SME Coverage:
- Limited rating services for Small and Medium Enterprises (SMEs).
Failure to Anticipate Defaults:
- Instances of agencies failing to anticipate defaults promptly.
Legal Accountability:
- Calls for increased legal accountability for inaccurate ratings.

Credit Rating Agencies UPSC

Credit rating agencies in India, including CRISIL, CARE, ICRA, SMREA, Brickwork Rating, India Rating and Research Pvt. Ltd, and Infomerics Valuation and Rating Private Limited, assess a borrower’s creditworthiness based on factors such as financial statements, debt levels, repayment history, and geopolitical and economic events. SEBI regulates these agencies, overseeing their periodic re-evaluations of ratings in response to developments like the Coronavirus pandemic and climate change.

Credit Rating Agencies in India FAQs

How many credit rating agencies are there in India?

There are a total of seven credit agencies in India viz, CRISIL, CARE, ICRA, SMREA, Brickwork Rating, India Rating and Research Pvt. Ltd and Infomerics Valuation and Rating Private Limited.

What is ICRA and CRISIL?

CRISIL, or Credit Rating Information Services of India Limited, uses modifiers within its 'CRISIL AA' to 'CRISIL C' ratings to indicate comparative standing. ICRA, standing for Investment Information and Credit Rating Agency, offers credit ratings, research, and risk assessment services, registered with SEBI.