The credibility of credit rating agencies in India has come
into question since the crisis involving Infrastructure Leasing
and Financial Services (IL&FS). While the Indian regulators
are aware of the problem, trying to come up with a fix
won’t be an easy task as there are many problems
with the existing system. Change is urgently needed as investor
confidence is waning when they can no longer trust rating
Credit rating agencies ignored the rising debt levels at
IL&FS and continued to give it high ratings despite the
fact that a few of the group's companies defaulted on
their repayment obligations. It was only after the IL&FS
defaulted on a series of loan payments in September 2018 that
rating agencies downgraded the group by multiple notches.
Similar issues have also arisen following potential defaults of
Dewan Housing Finance in June 2019, Zee Entertainment in
January 2019 and other...