Credit rating agencies (CRA) evaluate the credibility of companies and distinct entities. In simpler terms, these agencies check your ability to repay the loan and rate your credit risk. All credit rating agencies are managed by the SEBI regulations 1999 of the SEBI. There are an overall 7 top credit agencies in India. They are CRISIL, ICRA, CARE, SMREA, Brickwork rating, Infomerics valuation and rating private ltd and India rating.

How do credit rating agencies work?

Credit rating agencies provide ratings to entities or organizations. Entities that get rated by the credit rating agencies consist of state governments, companies, countries, nonprofit organizations, special purpose entities, securities, and local government bodies. Credit rating agencies consider various parameters like the level & type of debt, financial statements, lending & borrowing history, potential to repay the debt and previous debt of the entities for rating their credit. After the credit rating agency rates the company entities, it caters additional inputs to investors, following which investor analyses and undertakes sound investment decisions. Poor credit rating shows that the entity is at extreme risk of defaulting. Credit ratings given by entities act as benchmarks for the financial market regulations. Note that the credit ratings get published by the agencies like S&P and Moody’s Investors Services depending upon detailed analysis.

Few of the top credit rating agencies in India include:

CRISIL (credit rating information services of India ltd)

CRISIL is the oldest credit rating agency. It was started in India in 1987, following which the agency became public in the year 1993. Headquartered in Bombay, CRISIL proceeded with infrastructure rating in the year 2016 and halted it in 30 years in the year 2017. CRISIL took up an 8.9 percent stake in the CARE rating agency in the year 2017. CRISIL also started India’s first index to benchmark the performance of FPI (foreign portfolio investors) in the fixed income market in rupee and dollar versions in the year 2018. The company’s portfolios involve mutual fund ranking, CRISIL coalition index, ULIP (unit-linked insurance plans) ranking and so on.

ICRA ltd

ICRA ltd was set up in the year 1991 in Gurgaon. The company was formerly called Investment Information & Credit Rating Agency. Before becoming public in the year 2007, ICRA was jointly managed by Moody’s and several Indian financial & banking service companies. ICRA group presently has 4 subsidiaries – namely analytics and consulting, ICRA Lanka, ICRA Nepal and Data Services & KPO. Presently, Moody’s Investors Service, International Credit Rating Agency, is one of the biggest shareholders. ICRA’s product portfolio involves rating for – financial rating, corporate debt, insurance, structured finance, mutual fund, infrastructure, public finance, SMEs, and others.

CARE (credit analysis & research limited)

Launched in 1993, CARE provides credit rating services to areas like debt ratings, corporate governance, bank loan ratings, financial sector, issuer ratings, infrastructure ratings and recovery ratings. Headquartered in Bombay, CARE provides 2 distinct categories of ratings – short term and long-term debt instruments. The company also provides ratings for the IPOs (initial public offerings), RESCO (renewable energy service companies), real estate, financial assessment of the shipyards, ESCO (energy service companies) grades and various other educational institutes. CARE ratings have even ventured into the valuation service and offered valuation of debt, equity instruments and market associated debentures. Additionally, the company has started a new international rating agency called the ARC ratings by teaming with 4 partners from Malaysia, Portugal, South Africa, and Brazil.

BWR (Brickwork ratings)

Brickwork rating was started in the year 2007 and was promoted by the Canara Bank. It provides ratings for SMEs, bank loans, municipal corporations, corporate governance ratings, financial institutions, and capital market instruments. Also, it grades NGOs, IPOs, tourism, hospitals, real estate investments, educational institutions, IREDA, MNRE and MFI. Brickwork rating is highly recognized as an external credit assessment agency by the RBI to conduct the credit ratings.

India rating & private research ltd.

India rating is completely a subsidiary of Fitch Group. It provides credit ratings for the banks, insurance companies, project finance, finance & leasing companies, financial institutions, managed funds & urban local bodies. Additionally, the company is highly recognized by the National Housing Bank and RBI.

Acuite ratings and research limited

Acuite Ratings and Research Ltd. is a full-service agency that is one of the recognized credit bureaus registered with the SEBI (Securities & exchange board of India). The company received the RBI accreditation as ECAI (external credit assessment institution) for the bank loan ratings under the BASEL II norms in 2012. Note that since then, the agency has assigned over 8,300 credit ratings to numerous debt instruments, securities, and bank facilities across sections of industries. Also, its registered head office is in BKC, Mumbai.

Infomerics valuation & rating private ltd

It is an RBI accredited, and SEBI registered credit agency. It was started by eminent finance experts and is run under the leadership of Vipin Mallik. The credit bureau strives to provide unbiased & detailed evaluation and analysis of creditworthiness to the banks, NBFCs, corporates and medium & small-scale units. Owing to its grading and rating system, Infomerics can decide the organization’s credibility. Informetrics assists in lowering any type of info asymmetry amongst lenders and investors. Keeping transparency because it is the core value, and the credit bureau ensures to deliver accurate and comprehensive records and reports of all clients.

FAQs on the credit rating agencies

What is a credit rating agency?

A credit rating agency assesses the company’s financial strength. It also evaluates the financial capacity of government entities. Such ratings assist investors in recognizing the companies that have the potential to repay their debts on time.

What is the distinction between credit scores and credit ratings?

Credit rating is provided to the company, government body, or organization by computing its potential to repay the loan debt and predicting the chances of default. However, a credit score is provided to the individual after considering his or her repayment behavior and credit history.

Who manages the credit rating agencies?

Credit rating agencies are managed by the SEBI. Credit rating agencies are reviewed and monitored by the SEBI.

How is credit rating shown?

Rating is denoted in alphanumeric symbols. For instance, AA+, A- etc.