Credit rating agencies are institutions that assess the creditworthiness of entities and organizations. They operate to analyze debtors’ ability to pay off borrowed money and also identify and rate their credit risk. All credit rating agencies in India typically come under the purview of SEBI Regulations.
There are around 7 credit rating agencies in India: CRISIL, ICRA, Brickwork Rating, CARE, India Ratings and Research Pvt. Ltd., SMREA, and Infomerics Valuation and Rating Private Limited.
How do credit rating agencies operate?
Credit rating agencies rate the creditworthiness of the following entities:
- State government
- Nonprofit organization
- Local government bodies
- Special purpose entities
Typically, they weigh in factors such as an entity’s type of debt, the extent of the debt, financial statements, borrowing history, repayment capability, and existing debt before rating them.
After a credit bureau rate an entity, it offers additional inputs, after which an investors or creditors base analyzes the borrower’s situation and makes a well-informed investment decision.
The credit rating given by such agencies serves as a financial market benchmark that aids lenders and investors in making fruitful decisions.
What is the primary difference between credit score and credit rating?
A credit score is a 3-digit number assigned to an entity after weighing in their credit history and track of repayment. In case of credit rating, a credit rating bureau rates an organization, a government body, or a company based on its repayment capacity and risk of default.
Both are crucial as the rating help lenders/investors make a solid financial decision regarding investing or lending money to an entity. On the other hand, credit scores help individuals to understand their financial standing and creditworthiness and take actions to improve the same to boost their chances of securing financial aid as and when required.
Top credit rating agencies in India
These are some of the top credit rating bureaus in India:
Credit Rating Information Services of India Limited or CRISIL
This particular credit rating bureau is among the oldest in India and was launched in 1987. The bureau went public in 1993 and has stationed its headquarters in Mumbai. CRISIL started infrastructure rating in 2016 and completed 30 years of operations in 2017.
Notably, in 2017 it also acquired a stake of 8.9% in the CARE credit rating bureau. In 2018, CRISIL also launched the country’s first benchmark performance of investments made by foreign portfolio investors in the fixed-income market.
CRISIL’s portfolio houses the likes of mutual fund ranking, CRISIL coalition index, Unit Linked Insurance Plans or ULIP rankings, and more.
This credit rating agency is a public limited company and was first set up in Gurugram in 1991. Initially, the company was known as the Information and Credit Rating Agency of India Limited.
Before the company went public in 2007, it was a joint venture with Moody’s and several financial and banking service institutions in India. The ICRA Group has 4 subsidiaries, and Moody’s Investor Service, the international credit rating bureau, is its largest shareholder.
Its product portfolio comprises financial rating, market-linked debentures, corporate debt, SME, insurance, structured finance, mutual funds, infrastructure, project and public finance, and more.
Credit Analysis and Research Limited or CARE
CARE was launched in 1993 and offers credit rating services such as financial sector, corporate governance, recovery ratings, debt rating, financial sector, infrastructure ratings, bank loan ratings, bank loan ratings, and issuer ratings.
The institution’s headquarter is stationed in Mumbai, and it offers 2 distinct categories of bank loan ratings, short-term and long-term debt instruments. CARE also offers ratings for IPO, real estate, energy service companies, renewable energy service companies, and financial assessment of shipyards. CARE ratings also ventured into valuation services offering assistance with debt instruments, equity, and market-linked debentures.
CARE has also launched an international credit rating bureau named ARC Rating by partnering up with four major entities from Malaysia, South Africa, Brazil, and Portugal. The new credit rating agency has started its operations and has already finished the sovereign rating of nations, including India.
India Ratings and Research Private Limited
One of the most popular credit rating agencies in India, this one is a fully owned subsidiary of the Fitch Group. India Ratings and Research Private Limited also offer credit ratings for banks, project finance, insurance companies, financial institutions, finance and leasing companies, urban local bodies, corporate issuers, and managed funds. Besides SEBI, India Rating and Research Private Limited are also recognized by the National Housing Bank and Reserve Bank of India.
Acuité Ratings & Research Limited
This credit rating agency in India is registered with SEBI. It also received RBI accreditation as an established External Credit Assessment Institution for bank loan ratings under the BASEL-II standard in 2012.
Since then, the agency has assigned over 8300 credit ratings to securities, bank facilities, and debt instruments across India and through sections of industries. Acuité Ratings & Research Limited’s head office is situated in BKC, Mumbai.
The credit rating agency was founded in 2007 and is backed by Canara Bank. The institute offers ratings for SMEs, bank loans, corporate governance ratings, capital market instruments, municipal corporations, and financial institutions.
It also grades tourism, IPOs, NGOs, real estate investments, IREDA, hospitals, MFI, educational hubs, and MNRE. Brickwork Ratings is acknowledged as an external credit assessment agency by RBI that carries out credit ratings in the country.
Infomerics Valuation and Rating Private Limited
Infomerics Valuation and Rating Private Limited is a SEBI-registered and RBI-accredited credit agency. The credit rating bureau offers unbiased analysis and evaluates creditworthiness to corporates, small and medium entities, banks, and NBFC. Through the agency’s rating and grading method, they recognize credit worthiness of organizations and help reduce misinformation flow among lenders and investors.
These are India’s top credit rating agencies that help organizations make fruitful financial decisions and invest time and capital in worthy entities. The grading system followed by these bureaus not only helps lenders but also sets apart quality organizations and entities from less creditworthy counterparts.