Credit Rating Agencies (CRAs) in India are regulated by SEBI under SEBI (CRA) Regulations, 2023. Major agencies include CRISIL, ICRA, CARE, Brickwork, Acuite, and Infomerics. They assign ratings from AAA (highest safety) to D (default). Key regulatory concerns include conflict of interest from issuer-pays model, rating shopping, and inadequate surveillance. SEBI mandates dual ratings for public issues above ₹100 crore, periodic review mechanisms, and stringent disclosure norms to enhance credibility and investor protection.

Credit Rating Agencies serve as financial intermediaries that assess creditworthiness of debt instruments and issuers, crucial for India's corporate bond market development. The fundamental conflict arises from the 'issuer-pays' model where companies seeking ratings pay the agencies, potentially compromising objectivity. SEBI's regulatory framework addresses multiple concerns: rating shopping (issuers approaching multiple agencies for favorable ratings), surveillance gaps during instrument lifecycle, and inadequate disclosure of rating methodologies. The 2023 regulations introduced stricter norms including mandatory rotation of rating analysts, enhanced surveillance mechanisms, and penalty structures. CRAs impact capital allocation efficiency, as institutional investors rely heavily on ratings for investment decisions. Poor rating practices contributed to several corporate defaults like IL&FS, highlighting systemic risks. SEBI's measures include mandating separate teams for initial rating and surveillance, restricting ancillary services, and requiring detailed justification for rating actions. The regulatory evolution reflects broader financial stability concerns, as rating failures can trigger market disruptions and affect investor confidence in the corporate bond ecosystem.