A study on the services of credit rating agencies with reference to selected companies and debt instrument holders in Tamil Nadu

Credit rating agencies (CRAs) play a key role in financial markets by helping to reduce the informative asymmetry between lenders and investors, on one side, and issuers on the other side, about the credit worthiness of companies or countries. CRAs’ role has expanded with financial globalization and has received an additional boost from Based which incorporates the ratings of CRAs into the rules for setting weights for credit risk. Ratings trend to be sticky, lagging markets, and overreact when they do change. This overreaction may have aggravated financial crises in the recent past, contributing to financial instability and cross-country contagion. Promotion of competition may require policy action at national and international level to encourage the establishment of new agencies and to channel business generated by new regulatory requirements in their direction. Finally, we zoom in on the question of whether and how CRAs should be regulated given their function, focusing on recent trends and opinion, awareness, factors of selected companies and debt instrument holders in Tamil Nadu.