Q. Consider the following statements:
1.Credit rating agencies(CRA) provide information on the relative creditworthiness of an issuer or instrument.
2.The CRA Regulations in India currently recognise only the issuer-pays model.
Which of the statements given above is/are correct?
Answer: C
Notes:
Credit rating agencies provide retail and institutional investors with information that assists them in determining if debtor will be able to meet their obligations. They help investors, customers etc. to get an overall idea of the strength and stability of an organization and enable them to make informed decisions.
The CRA Regulations in India currently recognise only the issuer-pays model, under which, the rating agencies charge issuers of bond and debt instruments a fee for providing a ratings opinion. Thus, this model has an inbuilt conflict of interest.
Source- Article