Credit Rating in India
The history of credit rating agency (CRA) in India is not very old.
- India was first among the developing world to set up a credit rating agency. Credit Rating Information Services of India Limited (CRISIL) is the first credit rating agency established in India in the year 1988.
- Second is Investment Information and Credit Rating Agency of India (ICRA) established in the year 1990.
Table of Contents
- 1 Credit Rating in India
- 2 Credit Rating Agency in India
- 2.1 Credit Rating Information Services of India Limited (CRISIL)
- 2.2 Investment Information and Credit Rating Agency of India Limited (ICRA)
- 2.3 Credit Analysis & Research Ltd. (CARE)
- 2.4 Fitch India Limited
- 2.5 ONICRA Credit Rating Agency of India Limited
- 2.6 Brickwork Ratings India Pvt. Limited (BWR)
- 2.7 SME Rating Agency of India Limited (SMERA)
During this short span of time, the major rating agencies have instilled confidence in the minds of the Investors and Regulatory bodies. The Indian Rating Agencies are providing training and technical assistance in setting up rating agencies in many other countries.
In India, credit rating service gets more importance and become popular after 1990 when the Reserve Bank of India and Securities Exchange Board of India made credit rating mandatory for the issue of Commercial Paper and some kinds of debentures and debt instruments. In the following paragraph we will discuss some credit rating agencies of India.
Credit Rating Agency in India
- Credit Rating Information Services of India Limited (CRISIL)
- Investment Information and Credit Rating Agency of India Limited (ICRA)
- Credit Analysis & Research Ltd. (CARE)
- Fitch India Limited
- ONICRA Credit Rating Agency of India Limited
- Brickwork Ratings India Pvt. Limited (BWR)
- SME Rating Agency of India Limited (SMERA)
Credit Rating Information Services of India Limited (CRISIL)
CRISIL is the largest and first credit rating agency of India and a global leader in research, ratings and risk & policy advisory services. It was established in the year 1987 and commences operations in the year 1988.
CRISIL has been promoted by ICICI and UTI as a public limited company with its head quarters at Mumbai. It is one of the top credit rating agencies in India. CRISIL had assessed more than 61000 entities and more than Rs. 47 trillion of debt. It Rates two-thirds of bonds outstanding in India and highest number of outstanding Small and Medium Enterprises in India.
CRISIL’s services include credit ratings and risk assessment; research on India’s economy, industries and companies; financial research and outsourcing; fund services; risk management and infrastructure advisory services. CRISIL provides rating and risk assessment services to manufacturing companies, banks, nonbanking financial companies, and financial institutions, housing finance companies, municipal bodies and companies in the infrastructure sector.
It rates long term instruments such as debentures, bonds, preference shares, structured obligations, fixed deposits, commercial paper and short term deposits. It makes credit assessments of various entities including state governments and subsidiaries and joint ventures of multinationals. It also assigns ratings of financial strength to insurance companies.
Investment Information and Credit Rating Agency of India Limited (ICRA)
ICRA was incorporated on January 16, 1991 and launched its services on August 31, 1991. ICRA was promoted by Industrial Finance Corporation of India jointly with other leading financial/ investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.
ICRA is a Public Limited Company, with its shares listed in the Bombay Stock Exchange and National Stock Exchange. International Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder. The primary objective of ICRA is to provide information and guidance to the investors and creditors for determining the credit risk associated with a debt instrument and credit obligation.
ICRA undertakes credit assessment for small scale industries, rating of collective investment schemes and claim paying ability of insurance companies. ICRA rates rupee-denominated debt instruments, such as bond and debentures, fixed deposit, commercial paper, certificates of deposit and sector specific debt obligations issued by infrastructure companies. Since 1995, ICRA has been rating equity instruments.
ICRA offers rating services to a wide range of issuers which includes banks and other financial instructions, service company, insurance company, non-banking financial companies, telecom companies, manufacturing companies, power companies etc. ICRA has developed highly specialized rating methodologies for grading of different entities.
Credit Analysis & Research Ltd. (CARE)
CARE was incorporated in April 1993 as a credit rating information and advisory services company. CARE Ratings’ registered office and head office is located at Mumbai. In addition, CARE Ratings has regional offices at Ahmedabad, Bengaluru, Chandigarh, Chennai, Coimbatore, Hyderabad, Jaipur, Kolkata, New Delhi, Pune and Mauritius.
It is a credit rating and information services company promoted by the Industrial Development Bank of India (IDBI) jointly with financial institutions, public / private sector banks and private finance companies. It is offering a wide range of services such as rating services, advisory services, information services and equity research services.
CARE ratings are recognized by Government of India, Reserve Bank of India and Securities Exchange Board of India. CARE provides rating to industrial companies, public utilities, financial institutions, infrastructure projects, state government and municipal bodies. CARE rates all types of instruments like commercial papers, fixed deposits, bonds, debentures and structures obligations.
Apart from rating services, CARE provides advisory services such as project advisory services and financial restructuring services. CARE also prepares confidential reports for companies, which may be useful in taking decisions with regard to financial options, joint ventures, acquisitions and collaborations.
Fitch India Limited
With the acquisition of Duff and Phelps Credit Company in April 2000 by Fitch Ratings, Duff and Phelps Rating India Private Limited became Fitch India Limited. Duff and Phelps Credit Rating India Private Ltd was the first joint venture rating company promoted by JM Financials, Alliance Group and the international rating agency Duff and Phelps.
At present Fitch Group is comprised of: Fitch Ratings – a global leader in credit ratings and research; Fitch Solutions – a leading provider of credit market data, analytical tools and risk services; BMI Research – an independent provider of country risk and industry analysis specializing in emerging and frontier markets; and Fitch Learning – a preeminent training and professional development firm. It has dual headquarters in London and New York. Majority of Fitch Group is owned by Hearst.
Fitch introduced a rating scale to meet the growing demand for independent analysis of financial securities. Fitch was one of the three rating agencies that were first declared as nationally recognized statistical rating organizations by the Securities and Exchange Commission in 1975.
Fitch Group is a global leader in financial information services with operations in more than 30 countries. Fitch has 49 offices worldwide with the coverage of more than 3,000 financial institutions, more than 1,200 corporate issuers. The company has over 8,600 structured finance transactions and also maintains surveillance of more than 1,200 European structured finance transactions and 200 Asian structured finance transactions.
Fitch India analysis have access to Fitch internationals large global information network. The credit rating of Fitch apply to a variety of entities and issues which includes Financial Institutions, Insurance, Sovereigns and Supranational, Corporate Finance, Public Finance, Structured Finance, Islamic Finance, Global Infrastructure and Project Finance.
ONICRA Credit Rating Agency of India Limited
ONICRA Credit Rating Agency is one of the leading Credit and Performance Rating agencies in India. The company is based in Gurgaon and founded in 1993. It provides ratings, risk assessment and analytical solutions to Individuals, MSMEs and Corporates. Third party credit and performance rating and assessment help to create “trust” between players in markets that underpins transactions.
ONICRA has pioneered individual credit rating services in India. ONICRA plays a central and critical role in collecting and analyzing a variety of financial, operational, industry and market information, synthesizing that information, and providing autonomous, reliable assessments of the entity, thereby providing stakeholders with an important input into their decision making process. It has developed over the years the methodology to assess the financial risks in respect of various types of transactions related to individuals and small and medium enterprises.
ONICRA is presently operating at commercial scale. It provides pre and post disbursement and activation solutions so as to bridge the gap between the principals and their customer. It also serves clients in auto finance, consumer finance, credit card issues and cellular phones service provider.
Brickwork Ratings India Pvt. Limited (BWR)
Brickwork Rating India Pvt. Ltd. was founded in 2007 by group of professionals to provide rating of public issues and others to help investors take information decisions. BWR has its corporate office in Bangaluru and a countrywide presence with its offices in New Delhi, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai and Ahmedabad along with representatives in more than 150 locations.
Brickwork Ratings (BWR) is registered with SEBI accredited by RBI and empanelled by National Small Industries Corporation. It offers bank loan, Commercial papers, MSME rating and grading services. NABARD has empanelled Brickwork for MFI and NGO grading.
Brickwork assigns two types of credit ratings- one to the issuers and the other to specific debt issues or other financial obligations. The rating of issuer, which is called “Brickwork counterparty credit rating”, reflects the current opinion about an issuer’s overall capacity to fulfill its financial obligations. The other type of rating is the rating of issues, mainly the debt issues. Four types of analysis were made on debt issues namely business analysis, industry analysis, financial analysis and management analysis.
BWR has rated debt instrument such as bands, bank loans, securitized paper of over Rs.9, 30,000 Crore. BWR has also rated about 5000 MSMEs, Fixed Deposit and Commercial Papers of over 19,700 crore.
SME Rating Agency of India Limited (SMERA)
SMERA commenced its operations in 2005 as a full service Credit Rating Agency, registered with the Securities and Exchange Board of India (SEBI), and accredited by Reserve Bank of India (RBI) as an External Credit Assessment Institution (ECAI), for Bank Loan Ratings under BASEL-II norms. SMERA is a joint venture started by Small Industrial Development Bank of India (SIDBI), Dun & Brand Street Information Services India Private Limited (D& B) and several leading banks in India.
SMERA is the country’s first rating agency that focuses primarily on small and medium enterprises (SME) in India. SMERA has assigned more than 44,000 ratings since inception.
The main objective of rating SMEs is to facilitate greater and easier flow of credit to SMEs from the banking sector. SMERA is empanelled with National Small Industries Corporation (NSIC), the nodal agency of the Ministry of MSME, Government of India to provide SMERA-D&B-NSIC Micro & Small Enterprises Rating for MSEs in India. SMERA makes two types of analysis- business risk analysis and financial analysis.
SMERA has achieved the reputation of providing comprehensive, transparent and reliable ratings, thus providing comfort and confidence to lenders and investors alike in decision making. SMERA ratings have gained wide acceptability and are now an integral part of the risk assessment process within the lending and investing community. SMERA has its Registered and Head Office in Mumbai, branches at 9 cities and representatives in more than 50 clusters across India.