Credit rating: New perspectives

There is a need for greater precision in quantifying risk and assessing quality through a finer gradation of risk categories

Of late there have been calls to set up international credit rating agencies from different regions of the world. Recently, BRICS economies have announced their intent to set up a rating agency. Credit rating agencies generate investor-lender confidence and help develop capital markets. A rationale for a rating agency is to provide independent unbiased view on a borrower’s ability to honor its financial commitments. Sound ratings are directly linked to health of a financial system. From an Indian context, the existence of large-scale non-performing assets on the books of financial sector players is reflective of the nascent state of rating