Understanding and Use of Credit Rating In India: A Survey of Individual and Institutional Investors
31 Pages Posted: 23 Oct 2012
Date Written: March 30, 1999
Abstract
Credit rating, although a relatively new concept in the Indian financial market, have gained wide acceptance among investors. At the same time, casual and anecdotal evidence suggests that there are concerns among investors and regulators about the performance of rating agencies in India. This paper examines investors' awareness, perception, understanding level and usage of credit rating through a questionnaire based sample survey covering individual as well as institutional investors. We discover a high diffusion of rating usage among all class of investors, though there is a perceptible disenchantment with reliability of ratings, propensity of subsequent downgrading and timeliness of rating surveillance. The survey also reveals that the institutional investors possess superior knowledge and understanding about ratings than individual investors. Thus, the survey underlines the need for rating agencies to work on educating the common investors to propagate proper understanding and usage of credit rating.
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