7 Leading Credit Rating Agencies in India 2024

Lenders assess trustworthiness through credit rating agencies which evaluate the creditworthiness of individuals, companies and countries. These agencies use a variety of factors such as financial history, overall financial stability and payment behaviour to determine credit ratings. This information helps lenders make informed decisions about lending money to borrowers. 

Their influence extends beyond just making decisions. We will delve into the various aspects of what they do, how they do it and why it is significant for investors, borrowers or anyone interested in the finance industry. 

What is the Meaning of Credit Rating?

Understanding credit ratings is crucial for making informed final decisions. Credit ratings assess the creditworthiness of individuals and organizations, indicating their ability to repay debts and meet financial obligations. These evaluations are conducted by credit rating companies which provide free risk assessments. By grasping the importance of credit ratings, individuals can make smarter financial choices.

Understanding the factors that impact credit ratings and actively managing financial responsibilities are key to improving creditworthiness and accessing better financial opportunities. Whether it’s companies seeking investment, governments aiming for favourable borrowing terms or individuals and organisations in need of improved credit, being aware of credit rating elements can lead to increased financial options. 

Overview of the Indian Credit Rating Industry

India created its first credit rating agency called CRISIL in 1988, which was followed by the establishment of ICRA in 1990 and CARE in 1993. The practice of credit rating gained traction in the 1990s when the Reserve Bank of India and SEBI made it compulsory for the issuance of commercial paper, debt instruments and debentures. 

The Indian Credit Rating Agency is globally significant and is second only to the US in terms of the number of ratings and agencies. There are 4 rating agencies in India issuing over 5000 ratings for around 1400 issuers with CRISIL leading with a 65% market share. The industry’s growth has been supported by regulatory initiatives.

The growth of the credit rating industry in 1992 was driven by various factors. These included the introduction of commercial paper requirements by the Reserve Bank and the mandate by SEBI to rate bonds. The industry also benefitted from factors like declining interest rates, preference for market borrowings and an increase in the state government borrowings through special purpose vehicles. 

Another contributing factor was the expansion of the private placement market which led to an increase in business volume for credit rating agencies. Although not mandatory for private placements, ratings were frequently requested by mutual funds and banks. 

How Do Credit Rating Agencies Function? 

Credit rating agencies (CRAs) assign ratings to organizations and entities such as securities, governments and companies. They consider factors like ability to repay debt, borrowing history, debt levels and financial statements before issuing a credit rating. These ratings provide investors with additional information to make informed investment decisions.

Poor credit ratings indicate a high risk of default. Credit ratings are important benchmarks for financial regulations and are published by SEBI and RBI-authorized agencies like CRISIL, ICRA, CARE etc. 

List of Credit Rating Agencies in India in 2024

The following are the details and roles of the leading Credit Rating Agencies in India along with their key functionalities - 

1. Infomerics Valuation and Rating Pvt. Ltd

Infomerics Valuation and Rating Pvt. Ltd is a SEBI-registered and RBI accredited Credit Rating Agency providing comprehensive analysis and evaluation of creditworthiness and ratings for various financial institutions. They offer credit rating services for a range of instruments including non-convertible debentures, securitisation transactions, bonds and commercial papers. Additionally, Infomerics also rates mutual funds alternative investment fund schemes, as well as provides grading services for corporate governance, IPOs and construction entities. 

2. Credit Rating Information Services of India Ltd. (CRISIL)

CRISIL Ratings Limited, established in 1987, is a comprehensive credit rating agency. It operates under CRISIL Limited, a subsidiary of S&P Global. It serves a wide range of entities including market intermediaries, issuers, lenders and investors. Its coverage spans various sectors such as urban local bodies, state governments, financial institutions, manufacturing companies, PSUs, NBFCs and banks.

CRISIL (Credit Rating Information Services of India) assesses the creditworthiness of businesses by considering factors such as their market share, market reputation and strengths. This agency plays a crucial role in aiding investors in making well-informed investment choices by issuing credit ratings for companies, banks and organizations. 

CRISIL offers a wide range of rating services including recovery risk ratings, fund ratings, corporate & financial sector ratings and independent credit evaluation. Additionally, they also provide services related to structured finance and insurance hybrids. Their ratings range from AAA to D, with AAA being the highest and D representing the lowest or default creditworthiness. 

3. India Ratings and Research Pvt. Ltd.

India Ratings and Research (Ind-Ra) is a reputable credit rating agency accredited by the Reserve Bank of India (RBI) and recognised by SEBI. It provides credit rating services to various entities including finance companies, corporate issuers, insurance companies and banks. With its headquarters in Mumbai, Ind-Ra operates from multiple branch offices in India. 

4. Investment Information and Credit Rating Agency of India (ICRA) Ltd.

ICRA Limited, formerly known as Investment Information and Credit Rating Agency of India Limited, was established in 1991. It provides independent and professional guidance and information to both institutional and individual investors as well as creditors. The agency is known for rating rupee-dominated debt instruments issued by various entities such as municipalities, manufacturing companies, PSUs, NBFCs and commercial banks. 

Additionally, ICRA specializes in assigning comprehensive credit ratings for various purposes including corporate governance, mutual funds, structured finance and performance. 

5. Brickwork Ratings India Private Ltd.

Brickwork Ratings (BWR) is a reputable credit rating agency registered with SEBI and accredited by RBI. It provides a comprehensive range of rating services for various financial instruments including non-convertible debentures, fixed deposits, bank loans and more. BWR’s expertise extends to offering credit ratings for banks, financial institutions, large corporate customers and government entities across different sectors. The agency’s offerings cater to a broad spectrum of clients, including those in the local government bodies, public sector undertakings, insurance sectors, infrastructure, financial and corporate bodies. 

6. Credit Analysis and Research (CARE) Ltd.

Established in 1993, Credit Analysis and Research Limited (CARE) is a prominent credit rating agency with expertise in covering various market sectors including the financial, manufacturing and infrastructure sectors. The agency offers ratings for various financial instruments including debentures, corporate bonds and CPs, helping investors make informed decisions based on the credit risk and risk-return expectations. 

Additionally, CARE Ratings Ltd. manages its wholly-owned subsidiaries including CARE Risk Solutions Pvt Ltd, CARE Advisory and Research & Training Ltd. 

7. Acuite Ratings & Research Ltd.

Acuite Ratings & Research Limited, previously known as SMERA Ratings Limited, is a leading credit rating agency accredited by RBI and SEBI. The agency specializes in providing ratings for financial sectors, corporate sectors and structured finance sectors with a focus on services like financial research, economic analysis and bank loan & bond ratings. 

Acuite primarily caters to small-sized private corporations, public sector organizations including the Nuclear Power Corporation and renowned companies in the financial sector across various industries such as retail, gas, oil, aviation, steel, IT & ITes, telecom and banking. 

What are the Key Factors That Affect Credit Ratings in India?

Some factors that can affect a company’s credit rating in India are as follows - 

• The credit rating agency assesses a company’s past performance and its borrowing history to determine its credit rating. Late payments or loan defaults can significantly lower a company’s credit rating, impacting its ability to borrow in the future.
• A company’s credit rating is influenced by its future commercial projections and present performance determines if the company will be profitable soon, ultimately affecting its credit rating. Positive projections and strong performance result in a higher credit rating, while pessimistic projections may lead to a lower rate
• Market reputation plays a crucial role in determining a borrowing firm’s credit rating. A positive reputation can lead to higher income and better loan repayment capability, ultimately boosting the credit rating. Conversely, a negative reputation or poor market perception can result in a lower credit rating. 

Frequently Asked Questions (FAQs)

Q: How many credit rating agencies do India have?

A: India has a total of 7 credit rating agencies namely Infomerics Valuation and Rating Pvt. Ltd, CRISIL, India Ratings and Research Pvt. Ltd, ICRA, Brickwork Ratings India Private Ltd, CARE and Acuite Ratings & Research Ltd. 

Q: Can you describe credit rating agency in simple words?

A: A credit rating agency is a company that assigns credit ratings to determine the likelihood of a debtor’s ability to make timely payments and the chance of default. 

Q: Who regulates credit rating agencies in India?

A: The Securities and Exchange Board of India regulates the credit rating agencies (CRAs) in India. 

Q: Is RBI a credit rating agency?

A: No, RBI is not a credit rating agency.

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Author: Abhik Das