"The judgement is qualitative in nature and the role of the quantitative analysis is to help make the best possible overall qualitative judgement or opinion. The reliability of the rating depends on the validity of the c

Credit rating agencies have come to play an important role in the capital markets. Their assessment on various instruments and also on sovereign and corporate entities has been increasingly used as benchmarks by regulators and investors. The rating industry counts- CRISIL, ICRA, CARE, Brickwork Ratings Pvt. Ltd., SMERA on the domestic front and Moody's Investor Services, Standard & Poor's (S&P), Fitch Group, as important global credit rating agencies following the dramatic growth of international financial markets. The rating process is itself based on certain given variables. The CRA does not perform an audit. Rather, it is required to rely on information provided by the issuer and collected by the analysts from different sources, including interactions in-person with various entities. Consequently, the agency does not guarantee the completeness or accuracy of the information on which the rating is based. Standard and Poor's has rightly pointed out in determining a rating, both quantitative and qualitative analyses are employed. The judgement is qualitative in nature and the role of the quantitative analysis is to help make the best possible overall qualitative judgement because, ultimately, a rating is an opinion. Rating assigned by CRAs are opinions based on established criteria and methodologies. As the rating process has to rely on audited figures and information supplied by the management, CRAs are, thus, required to ensure that they have systematically used all data available to them and which they have declared important to their rating. They should also have measures to establish whether the information used is accurate, authentic and form reliable sources. CRAs should not be allowed to rate instruments in cases where they do not have sufficient quality information to do so, increased disclosure about rating processes and decision outcomes would also improve their transparency. It is obligatory on the part of rating agency to provide current opinions on the credit-worthiness of the issuer. Quarterly results announced by the companies are analyzed to see if they are at variance with the rating agencies expectations. A continuous review is essential and not just desirable.