Convergence And Regulation Of Credit Rating Instruments With Special Reference To Crisil, Icra And Care

In the post-reforms era, with increasing market orientation in the Indian financial sector both existing and new companies are opting for finance from the capital market, money market, foreign exchange markets. The competition among firms for a slice of the savings cake has increased. The market is flooded with a variety of new instruments and complex financial products, such as asset-backed securities and credit derivatives to attract ordinary investors for subscription of their issues. These new instruments are embodied with complex features very difficult for an ordinary investor to understand and analyse. Besides this, investors no longer evaluate the creditworthiness of the borrowers by their names or size. Credit rating agencies have come into existence to assist the investors in their investment decisions, by assessing the creditworthiness of the borrowers. It is one of the supporting services and positive tool for the development of capital market in developing countries like India. Basic philosophy of credit rating is to assess the risk associated with and assign the rating to the debt instrument. The main purpose of the study is to know the Credit rating process that are adopted by Credit Rating Agencies in general and also to have a close observation on various ratings given by CRISIL, ICRA and CARE on specified instruments. The study also highlights the regulations and mandatory controls issued by SEBI from time to time in controlloing the operations of Credit Rating Agencies. Objectives 1. To understand the conceptual procedure of rating a credit instrument in Indian financial system. 2. To analyse long term and short term credit rating instruments that CRISIL, ICRA and CARE adopt for credit rating evaluation. 3. To frame out the various regulations propounded by SEBI from time to time in monitoring the Credit Rating Agencies. Research Methodology The study is based on the secondary data. The secondary data was collected from various text books, company websites, other websites, Journals and Articles. Scope of Study 1. The study is limited up to 3 rating agencies namely, CRISIL, ICRA and CARE. The study does not reflect the entire credit rating agencies all over the world. 2. The study is carried on long term and short term instruments rather on specifying them. 3. Credit rating symbols were analysed based on key criteria but not the entire structure.