Though most top-rung NBFCs like Sundaram Finance, Cholamandalam Finance, Kotak Mahindra Finance and 20th Century Finance Corporation have been getting their debt instruments rated by Crisil, the majority of NBFC rating assignments are from small NBFCs which are charged only the minimum rating fee, due to the small size of their debt issuances.

"In almost all cases, the rating agency ends up losing money when it undertakes a rating exercise for small debt instruments. This is the case with all industries and is not specific to NBFCs," says a rating agency official, adding that rating agencies make their money only on large debt issuances.

However, despite the boycott call given by different NBFC associations, those NBFCs that have got their debt instruments rated by Crisilwill have no option but to go by the ratings assigned until their instruments expire. "A rating, once accepted, is constantly monitored for the life of the instrument. After the initial rating, our responsibility is to the investors and not to the company," said a rating analyst with Crisil.

Four NBFC associations, on Friday, announced in Calcutta that they would boycott Crisil throughout India. The four associations are Hire Purchase & Lease Association, Association of Leasing & Financial Services Companies, Federation of Indian Hire Purchase Association and Equipment Leasing Association of India. HPLA has asked its members not to seek credit ratings from Crisil and have instead been asked to approach other rating agencies.

NBFCs have, over the past few months, been shying away from Crisil due to its tough rating philosophy and have been approaching other agencies like Icra and Duff & Phelps, which are known for "warmer" ratings. Crisil has, however, maintained that there will be no shift from its ratingphilosophy.

While NBFCs say that Crisil, despite being satisfied with the track records of companies, has been assigning them ratings below investment grade, the fact remains that the rating agency would have to study the future prospects of the industry -- a very crucial factor -- before rating any instrument.

Crisil, in a recent "outlook" on the NBFC sector, has said that the future for the industry remains bleak, with no immediate signs of a turnaround. Though dual rating is not mandatory, the recent spate of downgrades would force a number of companies to resort to two ratings for their debt instruments and then opt for the one they are more comfortable with. Companies need advertise only one of the ratings assigned to them when they solicit investments from the public.