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Kerala PSC Indian Economy Book Study Materials Page 356Book's First Page
12.32 ndian onom money multiPlier creDit rAting At end March 2012, the money multiplier (ratio of To assess the credit worthiness (credit record, M3 to M0) was 5.2, higher than end-March 2015, integrity, capability) of a prospective (would be) due to cumulative 125 basis point reduction in borrower to meet debt obligations is credit rating. CRR. During 2012–13, the money multiplier Today it is done in the cases of individuals, generally stayed high reflecting again, the CRR companies and even countries. There are some cuts. As on 31 December, 2014, the money world-renowned agencies such as the Moody’s, S multiplier was 5.5 compared with 5.2 on the & P. The concept was first introduced by John corresponding date of the previous year (Economic Moody in the USA (1909). Usually equity share Survey 2014–15). is not rated here. Primarily, ratings are an investor service. creDit counselling Credit rating was introduced in India is 1988 Advising borrowers to overcome their debt burden by the ICICI and UTI, jointly. The major credit and improve money management skills is credit rating agencies of India are: counselling. The first such well-known agency was (i) CRISIL (Credit Rating Information of created in the USA when credit granters created India Ltd.) was jointly promoted by National Foundation for Credit Counselling ICICI and UTI with share capital coming (NFCC) in 1951.52 from SBI, LIC, United India Insurance Company Ltd. to rate debt instrument— India’s sovereign debt is usually rated by six debenture. In April 2005 its 51 per cent major sovereign credit rating agencies (SCRAs) of equity was acquired by the US credit the world which are : rating agency S & P—a McGraw Hill (i) Fitch Ratings, Group of Companies. (ii) Moody’s Investors Service, (ii) ICRA (Investment Information and (iii) Standard and Poor’s (S&P), Credit Rating Agency of India Ltd.) was (iv) Dominion Bond Rating Service (DBRS), set up in 1991 by IFCI, LIC, SBI and (v) Japanese Credit Rating Agency (JCRA), select banks as well as financial institutions to rate debt instruments. and (iii) CARE (Credit Analyses and Research (vi) Rating and Investment Information Inc., Ltd.) was set up in 1993 by IDBI, other Tokyo (R&I). financial institutions, nationalised banks As on 15 January, 2013 most of these rating and private sector finance companies to agencies have put India under ‘stable’ category in rate all types of debt instruments. foreign and local currencies barring Fitch and S&P (iv) ONICRA (Onida Individual Credit which have put its foreign currency in ‘negative’ Rating Agency of India Ltd.) was set category. The government is taking a number of up by ONIDA finance (a private sector steps to improve its interaction with the major finance company) in 1995 to rate credit- SCRAs so that they make informed decisions as worthiness of non-corporate consumers the Economic Survey 2012–13 says. and their debt instruments, i.e., credit 52. Y. V. Reddy, the RBI Gonvernor, The Economic cards, hire-purchase, housing finance, Times, N. Delhi, 11 September, 2006. rental agreements and bank finance.