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Q33 (IAS/2022) Economy › Money, Banking & Inflation › Financial markets overview Official Key

Consider the following statements: 1. In India, credit rating agencies are regulated by Reserve Bank of India. 2. The rating agency popularly known as ICRA is a public limited company. 3. Brickwork Ratings is an Indian credit rating agency. Which of the statements given above are correct?

Result
Your answer: —  ·  Correct: B
Explanation

The correct answer is Option 2 (2 and 3 only). Below is the comprehensive explanation:

  • Statement 1 is incorrect: In India, Credit Rating Agencies (CRAs) are primarily regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Credit Rating Agencies) Regulations, 1999, and not the RBI.
  • Statement 2 is correct: ICRA (Investment Information and Credit Rating Agency) was incorporated in 1991 and is a public limited company listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Its majority shareholder is Moody’s Investment Company India Private Limited.
  • Statement 3 is correct: Brickwork Ratings (BWR) is indeed an Indian credit rating agency. It is registered with SEBI and empanelled by the RBI. It offers ratings for bank loans, NCDs, commercial papers, and other financial instruments.

Since statement 1 is false while statements 2 and 3 are factually accurate, Option 2 is the right choice.

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PROVENANCE & STUDY PATTERN
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Consider the following statements: 1. In India, credit rating agencies are regulated by Reserve Bank of India. 2. The rating agency popu…
At a glance
Origin: Books + Current Affairs Fairness: Low / Borderline fairness Books / CA: 3.3/10 · 6.7/10
You're seeing a guest preview. The Verdict and first statement analysis are open. Login with Google to unlock all tabs.

This question is a classic 'Wolf in Sheep's Clothing'. It looks factual and tough (asking about ICRA's corporate structure), but it is actually a simple elimination game. Statement 1 is a standard static fact found in every basic economy book. If you know SEBI regulates CRAs, the entire question is solved instantly.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Are credit rating agencies in India regulated by the Reserve Bank of India (RBI)?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"Credit Rating Agencies (CRA) are primarily regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Credit Rating Agencies) Regulations, 1999."
Why this source?
  • Directly states which regulator primarily oversees credit rating agencies in India.
  • Names the applicable SEBI regulation (SEBI (Credit Rating Agencies) Regulations, 1999), implying primary regulation is by SEBI, not RBI.
Web source
Presence: 4/5
"such other agencies registered with Securities and Exchange Board of India (SEBI) or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose."
Why this source?
  • Confirms CRAs are those registered with SEBI for specified purposes.
  • Also notes RBI may specify other credit rating agencies from time to time, indicating RBI can play a limited/occasional role but not primary regulator.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 9: Agriculture > Credit Rating Agencies > p. 282
Strength: 5/5
“Credit ratings are very important when entities are looking to borrow from international markets. Various factors are considered while assigning a rating or score such as present and past financial statements, borrowing history, repayment ability, etc. SEBI is responsible for regulation of CRAs in India. CRAs were criticised during the 2008 global financial crisis for not evaluating properly the risks associated with sub-prime lending and derivatives issued by the banks of the US.”
Why relevant

Explicitly states that SEBI is responsible for regulation of CRAs in India (identifies the regulator for credit rating agencies).

How to extend

A student could use this to infer CRAs fall under securities-market regulation (SEBI) rather than central-bank supervision and then check SEBI rules or the list of entities it regulates.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > Peer to Peer (P2P) Lender > p. 86
Strength: 4/5
“CICs inform banks whether a prospective borrower is creditworthy or not based on his past payment track record. The quality of information defines the ability of lenders to evaluate risk and of consumers to obtain credit at competitive rates. The CICs are regulated and licensed by RBI as per the Credit Information Companies (Regulation) Act”
Why relevant

Says Credit Information Companies (CICs) are regulated and licensed by RBI under a specific Act, showing RBI's regulatory role over some credit-related agencies.

How to extend

A student can contrast the statutory regulator for CICs (RBI) with the regulator named for CRAs (SEBI) to distinguish the two types of credit-related entities.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > Major Acts Administered by the RBI > p. 173
Strength: 4/5
“• The Reserve Bank of India Act, 1934 • Banking Regulation Act, 1949 • Foreign Exchange Management Act, 1999 • Public Debt Act, 1944 • Government Securities Act, 2006 • Securitisation and Reconstruction of Financial Assets and Enforcement of Security (SARFAESI) Act, 2002 • Credit Information Companies (Regulation) Act, 2005 • Payment and Settlement Systems Act, 2007 • Factoring Regulation Act, 2011”
Why relevant

Lists major Acts administered by RBI and includes the Credit Information Companies (Regulation) Act, 2005 — indicating which credit-related entities fall under RBI's legal remit.

How to extend

A student could use the list of Acts to map which institutions RBI oversees and then check whether CRAs appear under any RBI-administered Act (they do not here).

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > Commercial Banks > p. 67
Strength: 3/5
“Financial Institutions, NBFCs, Primary Dealers and Credit Information Companies (CIC) The four All India Financial Institutions – NABARD, NHB, EXIM Bank and SIDBI are under full-fledged regulation and supervision of the RBI. NBFCs, Primary Dealers and CICs are also under the regulation and supervision of RBI. RBI regulates Banks and NBFCs both but till July 2019 RBI had the powers to supersede the Board of Banks only (in case of any mismanagement/default) and not NBFCs. In July 2019, RBI Act 1934 was amended to allow RBI to supersede the Board of NBFCs also (and appoint administrator) in public interest.”
Why relevant

Describes categories RBI regulates (Financial Institutions, NBFCs, Primary Dealers, CICs) showing RBI's scope and implying other financial regulators may cover remaining entities.

How to extend

A student could note RBI's stated scope and, using that scope plus the regulator named for CRAs (snippet 9), deduce CRAs likely fall outside RBI's regulatory domain.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 70
Strength: 3/5
“The central bank of any country is usually the driving force in the development of national payment systems. The Reserve Bank of India (RBI) as the central bank of India has been playing this developmental role and has taken several initiatives for Safe, Secure, Sound, Efficient, Accessible and Authorised payment systems in the country. In India, the payment and settlement systems are regulated by the Payment and Settlement Systems Act, 2007 (PSS Act). In terms of Section 4 of the PSS Act, no person other than RBI can commence or operate a payment system in India unless authorised by RBI.”
Why relevant

Explains that certain financial activities (payment systems) require RBI authorisation under a specific Act, illustrating the pattern that India assigns regulation of specific financial functions to appropriate statutes/authorities.

How to extend

A student could apply this pattern: identify the statute that covers CRAs or the regulator mentioned for them (SEBI) to conclude which authority oversees that function.

Statement analysis

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Statement analysis

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IAS · 2024 · Q42 Relevance score: 4.13

Consider the following statements : 1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India. 2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs). 3. In India, Stock Exchanges can offer separate trading platforms for debts. Which of the statements given above is/are correct ?

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Consider the following statements: 1. Reserve Bank of India was nationalised on 26 January, 1950. 2. The borrowing programme of the Government of India is handled by the Department of Expenditure, Ministry of Finance. Which of the statements given above is/are correct?

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Consider the following statements: 1. The National Housing Bank, the apex institution of housing finance in India, was set up as a wholly- owned subsidiary of the Reserve Bank of India. 2. The Small Industries Development Bank of India was established as a wholly-owned subsidiary of the Industrial Development Bank of India. Which of the statements given above is/ are correct?