Credit Rating in India: A Study of Rating Methodology Of Rating Agencies

Abstract

Credit rating is the symbolic indicator of the current opinion of rating agencies regarding the relative capability of issuer of debt instrument, to service the debt obligations as per contract. The corporations with specialized functions namely, assessment of the likelihood of the timely payments by an issuer on a financial obligation is known as Credit Rating Agencies. The main objective of the paper is to assess the consistency in rating methodology of each individual rating agency by taking companies belonging to same rating class (within group) including AAA, AA, A and BBB as sample. It has been assessed that all the rating agencies use consistent methodology while assigning a particular rating grade as there is no significant difference in the values of all the ratios which belong to different sets of similarly rated companies in maximum cases.