RATING SERVICES
Following rating services are generally provided by the credit rating agencies. For this purpose, the example of CARE has been taken:
(i) Credit Rating
CARE undertakes credit rating of all types of debt instruments, both short-term and long-term.
Credit rating is basically a view expressed by the credit rater on the ability of an issuer of a debt (i.e. bonds and debentures) to make timely payments. So, credit rating is basically a relative ranking of the credit quality of debt based instruments. After the liberalization of the Indian economy in 1991, credit rating agencies have started playing a significant role in the assessing the credit quality of debentures and bonds issued. The process of credit rating also reinforces the faith of investors in debt based instrument issued by corporates.
(ii) Information Services
The broad objective of the Information Service will be to make available information on any company, local body, industry or sector required by a business enterprise. Credit Rating Agencies through detailed analysis will enable the users of the service, like individual, mutual funds, investment companies, residents or non-residents, to make informed decisions regarding investments.
CARE, also prepares ‘credit reports’ on companies, for the benefit of banks and business enterprises. It will generally benefit the banks, insurance companies and other business enterprises by being cautious in granting loans or investing in the debt securities of a company.
(iii) Equity Research
Equity Research is another activity which credit rating companies pursue. CARE also does this. It generally covers detailed analysis of the major stock exchanges and identification of potential winners and losers. This includes among other things, judging them on the basis of industry, economy, market share, management capabilities, international competitiveness and other relevant factors.
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