Since their introduction about a little more than a decade ago, credit rating agencies have provided immense services to the banks and financial institutions in determining the credibility of a borrower. CIBIL™ was the first credit rating agency to establish itself in the early 2000s, followed by other agencies like Equifax, High Mark and Experian. 

Though they have proved to be indispensable for lending institutions. However, they come with their own limitations: 

No uniformity among rating companies in India: The average Indian investor is unable to comprehend the numerous credit ratings in use because there is no uniformity among credit rating agencies, especially among CRISIL, CARE, and ICRA.

No standardization in rating: For the same products, there is no standardization of credit rating among various rating agencies. There are six different grades of fixed deposits and five different grades of promissory notes.

There is no standardized fee structure for rating agencies in India: Credit rating agencies in India do not have a uniform fee structure or charging rates, which leads to confusion among borrowing concerns.

There isn't a strong distinction made between equity securities and mutual funds. This has always been one of the big drawbacks of credit ratings in India. Rating exercises for equity instruments and mutual funds should be made mandatory. There are many private sector mutual funds in India, and investors must be aware of the information of mutual funds that have either positive or negative characteristics.

Differences in credit ratings between two credit rating agencies: There is no remedy in India for differences in credit ratings between two credit rating agencies, which is a big drawback. But, the silver lining here is that credit scores from the four authorised credit rating agencies are equally valid and accepted by lenders. 

Conclusion:  It is a fact that Credit Rating Agencies play a vital role in the financial market by assisting to reduce the informative unevenness between lenders and investors, on one side, and issuers on the other side, about the creditworthiness of individuals or even companies. 

Better regulations and standardization of the credit rating process is essential for effective application of the credit ratings.