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Asian Journal of Management
Year : 2015, Volume : 6, Issue : 2
First page : ( 110) Last page : ( 116)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2015.00016.5

Indian credit rating agencies: The road to regulatory reforms

Sharma Prateek, Paul Samit

Indian Institute of Management, Lucknow

Corresponding Author E-mail: fpm13003@iiml.ac.in; fpm13005@iiml.ac.in

JEL Classification: G20; G24

Online published on 25 June, 2015.

Abstract

Credit rating agencies (CRAs) are considered as the gatekeepers of the financial markets. However, after the global financial crises, the role played by these CRAs came under regulatory scrutiny. CRAs have been accused of faulty ratings for complex asset backed securities and other risky derivative instruments. There are concerns over the inadequacy of existing rating methodologies to rate complex structured products and the inherent conflict of interest in the issuer-pay model. Consequently, there is a renewed impetus on regulating and reforming CRAs worldwide. In this paper, we discuss the Indian Credit rating Industry. We highlight the regulatory concerns and propose the regulatory reforms required for the Indian CRAs. We believe that these proactive measures will be instrumental in protecting Indian capital markets from future shocks.

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Keywords

Credit rating agencies, CRISIL, ICRA, IOSCO, Credit Rating, credit rating agencies, India, global financial crisis, regulatory reforms.

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