Move to strengthen regulations for credit rating agencies
By IANSWednesday, January 27, 2010
NEW DELHI - The government Wednesday said there were no immediate concerns over operations of credit rating agencies in the country but emphasised the need to strengthen the existing regulations in the wake of the current financial crisis.
The Committee on Comprehensive Regulation for Credit Rating Agencies (CRAs) in its report said: “Prima facie there is no immediate concern about the operations and activities of CRAs in India even in the context of the recent financial crisis.”
“However, there is a need to strengthen the existing regulations by learning the appropriate lessons from the current crisis,” the committee recommended.
CRA is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves.
Currently, there are five credit rating agencies in India, namely Crisil, Credit Analysis & Research (CARE), ICRA, Brickworks and Fitch India, which are registered with the market regulator Securities and Exchange Board of India (Sebi).
The committee has also suggested that there may be enhanced disclosures, continuation of the issuer-pays model, strengthened process and compliance audit, reporting of ownership changes, disclosure of default and transition statistics and strengthening the CRA regulation.
The committee’s report covers issues relating to the usage of credit rating services by different stakeholders in the present multi-regulatory environment.
The committee was set up by SEBI, Reserve Bank of India (RBI), Pension Fund Regulatory and Development Authority (PFRDA) and Insurance Regulatory and Development Authority (IRDA).
