Credit Rating Agencies rate the financial instruments, not the company. In this context, briefly explain the term credit rating agency. Explain the roles and responsibilities of credit rating agencies.

In terms of the (Credit Rating Agencies) Regulations, 1999, a Credit Rating Agency means a body corporate which is engaged in, or proposes to be engaged in, the business of rating of securities that are listed or proposed to be listed on a stock exchange recognized by the SEBI. Credit rating is extremely important as it not only plays a role in investor protection but also benefits industry as a whole in terms of direct mobilization of savings from individuals. Rating also provides a marketing tool to the company and its investment bankers in placing company's debt obligations with an investor base that is aware of, and comfortable with, the level of risk. Ratings also encourage discipline amongst corporate borrowers to improve their financial structure and operating risks to obtain a better rating for their debt obligations and thereby lower the cost of borrowing. The Roles and responsibilities of Credit rating agency are as follow: 1) Every credit rating agency shall abide by the Code of Conduct. 2) Every credit rating agency shall enter into a written agreement with each client whose securities it proposes to rate. 3) Every credit rating agency shall, during the lifetime of securities rated by it continuously monitor the rating of such securities. 4) Every credit rating agency shall disseminate information regarding newly assigned ratings, and changes in earlier rating promptly through press releases and websites, and, in the case of securities issued by listed companies, such information shall also be provided simultaneously to the concerned regional stock exchange and to all the stock exchanges where the said securities are listed. 5) Every credit rating agency shall disclose Rating definition and rationale. 6) Where any information is called for by the SEBI from a credit rating agency, including any report relating to its activities, the credit rating agency shall furnish such information to the SEBI. 7) Every credit rating agency shall comply with such guidelines, directives, circulars and instructions as may be issued by the SEBI from time to time. 8) Every credit rating agency shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. issued by the SEBI or the Central Government. 9) Every credit rating agency shall keep and maintain books of accounts, records and documents for a minimum period of five years.