Abstract

In the financial markets, for investors, lenders, and issuers, credit rating agencies (CRAs) have a critical part in reducing the asymmetry of information between various parties. Credit ratings allow us to recognize the credit impending of a region's individuals. The paper clearly describes the role played in the establishment of a nation by credit rating agencies; there is a rise in new start-ups as all investors are rated favorably. Banks are helping to recognize the investment position of India. The main aim of the study is to analyze the research gap on the impact of credit rating on credit risk with a review of the literature. The study briefly explains the research gap which helps to analyze the factors which are responsible for credit risk. The study analyzes the definitions of basic terms, the origin of credit rating agencies’ objectives, and the scope of the present study and the literature review by assessing the credit rating users and examined the consequence of credit rating agencies on the Indian financial markets. Based on the nationwide and worldwide literature it is found that if the credit history of the investors is good then their credit score would be better and positive. It would also be incredibly convenient to collect loans. Finally, it is concluded that there is a positive impact of Credit Rating on Credit Risk of banking sectors in India.

Highlights

  • The service sector is an essential industry that contributes significantly to the growth of the country, Credit ratings fall below those of financial services because their scores have financial security

  • The study was performed on diverse aspects of the efficiency of credit rating agencies

  • The analysis considered the national and international journals for studying credit rating and credit risk of the Indian banking sector, such as public and private sector banks

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Summary

Introduction

The service sector is an essential industry that contributes significantly to the growth of the country, Credit ratings fall below those of financial services because their scores have financial security. Significant participants are the credit rating companies in the financial sector. To compose a knowledgeable conclusion on the capital markets, they have an objective assessment of the credit capability of debt issuers. The CRA’s, the 'gatekeepers' of the financial and capital market, have over time become a position of immense power and influence. According to United States Congress, the appraisal affects the ability of an organization to borrow money. This decides whether a mutual fund or a money market fund is capable of investing in a company's bonds and has an effect on the price of the stock.

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