Presentation On

Credit Rating Agencies In India

ICRA Ltd.(Investment Information & Credit Rating Agency)

The ICRA Ltd. Has been promoted by IFCI at New Delhi. It is an independent company Ltd by shares with an authorised share capital of Rs.10 crore against 5 crore is paid up. IFCI holds 26%of the share capital &74% is contributed by UTI, LIC,GIC,PNB,CBI, Bank of Baroda,UCO Bank & HDFC Ltd.

Objectives Of ICRA

To provide information & guidance to institutional & individual investor.

To enhance the ability of the borrower/issuers to access the money market & the capital market for large volume of resources from investing public

To assist the regulators in promoting the transparency in the financial market.

Range Of Service Offered.

Rating Services Information services Advisory Services

Rating Services Includes.

The other Services in the area of credit rating include following………..

Credit Assessment General Assessment Bank Lines of Credit Rating Credit Assessment For Small Scale & Medium

Scale Industries. Insurance Company Paying Rating.

Information Services Includes;

Equity Grading Equity Assessment Corporate Review Money & Finance Investment Information Publications Corporate Reports

ICRA’S Rating Symbols

Long Term Instruments, including debentures/bonds/preference shares

Medium Term Instruments Comprising Certificate Of deposit

Short Term Instruments Including Commercial Papers

Equity

CARE LTD.(CREDIT ANALYSIS & RESEARCH IN EQUITY)

CARE Ltd. Is a credit rating & information services company promoted by IDBI jointly with investment institutions, banks & financial companies. The company started is operation in October 1993 & announced its Ist rating in 1993.

CARE Range Of Services Credit Rating Information Services Equity Research Other Services Includes…..• CARE Loan Rating• Credit Analysis Rating• Interest Rate Structure Model

DUFF & PHELPS CREDIT RATING

DCR Is the result of joint venture between the international credit rating agency Duff & Phelps & JM Financial & Alliance Group.

DCR Symbols• Long term & Medium term debt/instruments.• Short term debt/instruments.

ONICRA(ONIDA INDIVIDUAL CREDIT RATING AGENCY)

ONICRA is the first individual credit agency in India promoted by famous ONIDA group. ONIDA covers approximately 75 million households owning three popular items colour TVs, refrigerators & washing machines.

ONICRA RATING SCALE

ONICRA has been pioneer introduce the concept of individual credit rating. It has develop a rating system for various types of credit extension by conducting in debt study of all aspect the behaviour of credit seekers.

The creditworthiness of the individual is measured on various Parameters such as age, qualification, occupation, savings, stability of works and history of repayment etc.

ONICRA Rating Process ONICRA takes up the credit rating for

individuals at the request of lending institution. A lending institution writes to the ONICRA

whenever a potential customers visit the firm for customers credit.

The customers is required to fill in a prescribed form.

ONICRA uses 100 point scale to rate the individual on various parameters

MOODY’S INVESTOR SERVICES

Moody has stated following instruments:

• Corporate bonds• Municipal bonds• Commercial papers• Short term Municipal note• Preferred stock

Performance of credit Rating Agency

Reforms in the financial sector have greatly enhanced the role of credit rating agencies. CRISIL,ICRA & CARE, the three major rating agencies are handling 90%-95%of the business of credit rating. All of them are promoted by financial institutions. Financial institutions while advancing loans take the help of credit rating agencies to get the company rated. All these agencies have continued to expand their activities.

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This has raised a big question mark as to procedure or the methodology that these rating agencies follow for rating. It has also been observed that companies not satisfied with rating of one agency approach another rating agency for better rating. Rating process followed for rating has been found to be defective. Rating agencies take in to consideration only past & present performance & the projected future performance is ignored.

SEBI REGULATIONS

A credit rating agency shall make all efforts to protect the interest of investors.

A credit rating in the conduct of its business , shall observed high degree of integrity, dignity & fairness in the conduct of its business.

A credit rating agency shall fulfill its obligation in a prompt, ethical & professional manner.

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A credit rating agency shall at all times exercise due diligence ensure proper care & exercise independent professional judgment in order to achieve & maintain objectivity.

A credit rating agency shall have a reasonable & adequate basis for performing rating evaluations, with the support of appropriate & in depth rating researches.

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A credit rating agency shall have in place a rating process that reflects consistent & international rating standards.

A credit rating agency shall not indulge in any unfair competition nor shall it wean away the clients of any other rating agency on assurance of high rating.

A credit rating agency shall disclose its rating methodology to clients, users & the public.

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A credit rating agency shall, wherever necessary, disclose to the clients, possible sources of conflict of duties & interest, which could impair its ability to make fair, objectives & unbiased ratings.

A credit rating agency shall not make any exaggerated statement, whether oral or written, to the client either about its qualification or its capability to render certain services or its achievement with regard to the services rendered to other clients.

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A credit rating agency shall not make any untrue statement, suppress any material fact or make any misrepresentations in any documents, reports, papers or information furnished to the board, stock exchange or public at large.

A credit rating agency shall ensure that the board is promptly informed about any action, legal proceeding etc.initiated against it alleging any material breach or noncompliance by it, of any law, rules, regulations & directions of the board or of any other regulatory body.

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A credit rating agency shall ensure that there is no misuse of any privileged information including prior knowledge of rating decision or changes.

(a) a credit rating agency or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media.

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(b) a credit rating agency shall not offer fee-based services to the rated entities, beyond credit ratings & research.