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Credit rating in India

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  1. Introduction
  2. Present credit scenario in India
  3. The changes that have taken place
  4. Credit rating process
  5. The process of credit analysis
  6. Top Indian credit rating agencies
  7. SME Rating Agency of India Limited - SMERA
  8. Credit Information Companies (Regulation) Act 2005
  9. The importance and need of CIBIL
  10. The role of credit ratings and the changes it has bought
  11. Conclusion

The credit market in India has been growing steadily since the advent of the reforms process at the beginning of the nineties. Indian credit Market is the third largest in the world, after Japan and South Korea, in terms of primary issues of debt. Historically when a loan was given or a paper/note was issued, the associated Credit/Lending risk remained on the Lenders' Balance Sheet or with the buyer of the Credit till it was repaid. Treated as cost of doing the business. Today at least in the OECD countries ( including Japan ), Loan and risk are traded. Thus a Credit chain has been created. Rating Agencies study Organizations, Industries, Sector and the macro environment almost the same way as Equity Analysts do with a few key differences.

[...] Indian credit Market is the third largest in the world, after Japan and South Korea, in terms of primary issues of debt. CHANGES THAT HAVE/ARE TAKING PLACE Historically when a loan was given or a paper/note was issued, the associated Credit/Lending risk remained on the Lenders' Balance Sheet or with the buyer of the Credit till it was repaid. Treated as cost of doing the business. Today at least in the OECD countries ( including Japan Loan and risk are traded. [...]


[...] SME Rating Agency of India Limited (SMERA) Dedicated rating agency for SME sector in India Joint initiative by SIDBI, Dun & Bradstreet , Credit Information Bureau (India) Limited (CIBIL) and several leading banks SMEs are critical to the nation's economy They contribute approximately 40% of the country's domestic production, almost 50% of India's total exports and 45% of India's industrial employment Major obstacle in SME development is its inability to access timely and adequate finance SME Rating Agency of India Limited (SMERA) (Contd.) Wholly committed to facilitating the overall growth and development of Indian SMEs Primary objective is to provide SME ratings that are comprehensive, transparent and reliable SMERA aims to be the country's premier agency that is focused primarily on providing ratings to SMEs so as to reflect their intrinsic strength, with a view to facilitate faster and easier access to credit Major benefits provided include adequate and timely credit, low collaterals and lower rate of interest SMERA RATING SMERA Rating is an independent third-party comprehensive assessment of the overall condition of the SME It takes into account the financial condition and several qualitative factors SMERA Rating consists of 2 parts, a Composite Appraisal/Condition indicator and a Size indicator SMERA Rating categorises SMEs based on size, so as to enable fair evaluation of each SME amongst its peers An SME unit having a SMERA Rating would be able to enhance its market standing amongst trading partners and prospective customers. [...]

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