Abstract
The functioning of global financial markets depends in part upon reliable assessments of investment risks, and CRAs play a significant role in boosting investor confidence in those markets. Credit Rating is a symbolic indication of the current opinion regarding the relative capability of a corporate entity to service its debt obligations in time with reference to the instrument being rated. The ratings do not express opinions on whether the particular debt instruments should be bought or sold. They are only intended to convey information regarding the relative safety of the securities. Since their primary function is to evaluate credit risk, CRAs do not assess the economic appeal of investments.It is this rating process & practice which is in question. In this paper an effort has been made to address this pertinent issue & this can be done effectively by putting SEBI Directive into practice. SEBI very recently in the year 2010 proposed a new directive to be included in the regulation & to be followed from there on. This new regulation being to make it compulsory for credit rating agencies (CRAs) to have internal audits which are to be conducted on a half-yearly basis. Internal Audit for CRA’s should definitely be a pre-requisite as it is the tool to monitor financial aspects at micro level, so that in long runs, unrepairable errors can be rectified without interference of the outsider.
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