Credit rating is the symbolic indicator of the current opinion of rating agencies regarding the relative capability of issuer of debt instrument Plays a vital role in strengthening the capital market and building the investors confidence in the financial system Credit rating industry in India is at a nascent stage as compared to the credit rating scenario in developed countries
Aspects giving rise to Credit Rating The increasing role of capital and money markets consequent to disintermediation; Increased securitization of borrowing and lending consequent to disintermediation; Globalization of credit market; Continuing growth of information technology; Growth of confidence in the efficiency of the open market mechanism; Withdrawal of Government safety nets and the trend towards privatization
Advantages of Credit Rating Easy to raise resources Reduced Cost of Borrowings Reduced cost of public issue Rating builds up image Rating facilitates growth Recognition to unknown companies
Disadvantages of Credit Rating Rating under unfavorable conditions Down Grading will impact the interest of the company
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