"The improvement in ratings is not due to improved performance, but is rather a reflection of parentage-related factors - a strong parent can offset the possibility of a default, especially in a distress situation," Crisil noted. From April 1997 to March 2000, Crisil downgraded 149 NBFCs due to their deteriorating business and financial risk profiles. The highest number of downgrades was recorded at 84 during the year 1997-98 and at 54 during 1999-2000. By 1999-2000, it had declined to just nine. The real peak occurred during the 12-month period from October 1997 to September 1998, when as many as 94 NBFCs were downgraded.

With the shake out and exit of several large players, the earlier landscape of NBFCs dominating the asset-financing business has considerably altered. A closer look at the 15 largest NBFCs rated by Crisil as on March 31, 2000 points to five new entrants - Citicorp Finance, GE Capital, Kotak Mahindra Primus, GE Countrywide and Associates and another five that have strong manufacturer-linkages - Tata Finance, Ashok Leyland Finance, M&M Finance, Citicorp Maruti Finance and Bajaj Auto Finance.

Further, while 10 NBFC's were upgraded during the three-year period from April 1999 to September 2000, as many as three of these upgrades, for both Indian and MNC players, reflect the crystallisation of Crisil's notch criteria for parentage.

"Rating actions in the NBFC sector have now stabilised. This is evident from the proportion of rating changes as a percentage of total rating actions taken by Crisil in the NBFC sector.