Credit Rating

LETTERS TO THE EDITOR

This refers to the report stating that there is a move by Moodys to downgrade the sovereign rating of India. This process was actually initiated by our own credit ratings agencies who, for whimsical reasons, started downgrading each and every company. After all, sovereign rating is the sum total of the rating of a countrys commercial enterprises. This connection has to be understood. Something is seriously wrong somewhere.

First, Indian credit rating agencies had no basis for allotting AAA to almost all and sundry. Having blundered, the pendulum is now swinging in the other direction with the result that any existing rating is being revised downwards.

In respect of NBFCs, the RBI plans to leave their functioning solely in the hands of credit rating agencies who certainly do not have the level of expertise. Left to the public, very little confidence would be placed on the rating of these agencies. This unilateral action on the part of RBI may eventually sound the death knell of not only the NBFCs, but other segments of business as well.

It is time the credit rating people evolved a methodology which is realistic, responsible and future looking. If they do not change their mindset, the business interests of domestic companies and the country as a whole are bound to suffer.