Credit Rating as an Indicator for Creditworthiness of Organizations: An Emphasis on Indian SMEs

Over the last one decade, credit rating agencies have taken a center stage in loan disbursement process for organizations irrespective of their size. With the emergence of the recent global turmoil, the coming years will see even greater role being played by these agencies in the loan sanctioning process. This research paper focuses on the efficacy of the credit ratings and also their perceived credibility, regarding assessment of firm's creditworthiness while disbursing loans. For achieving this, firstly, this research paper intends to understand the working of various credit rating agencies in India followed by a primary research carried out with major private&public banks of India to understand their perception regarding the credibility of the reports offered by the credit rating agencies to the organizations. The paper is concerned mainly with the products and services being offered by the rating agencies for the MSME sector. This research provides valuable insights relevant for organizations like SMEs, banks and also rating agencies of our country.