A critical analysis of credit rating systems in india

The ability of the Indian credit rating agencies to generate fair and timely alarms of defaults has always been questioned in the past. It was concluded in various past studies that they suffer from serious limitations like lack of technical competence, inability to work independently, poor quality of reports and lack of transparency about their rating process. Low penetration and lack of investor awareness added to the problem. Consequently, a number of steps were taken by both regulators and raters to improve the performance of the Indian credit rating agencies. In this study, the rating systems of Indian credit rating agencies was qualitatively analysed to assess their credibility based on IOSCO's Principles. The analysis establishes that the competence and practices of Indian credit rating agencies are at par with global standards. The regulation in the country is very comprehensive and competent enough to control the quality of the rating process adequately. Another concern is inadequate disclosure norms for issuer and raters. The shortcoming is largely on the part of investor awareness about the importance and benefits of the ratings.