By IE&M Research
Sebi has tightened rules for credit rating agencies. It has directed them to disclose the nature of their compensation arrangements with rated entities, including exchange of gifts. Now each rating agency shall frame detailed rating criteria, include the same in its operations manual or internal governing document, and disclose the same on its website. Each criteria shall be reviewed periodically by the agency. This move follows an increase in the number of defaults due to a deteriorating corporate debt profile. Besides, agencies have also been asked to lay out the role and responsibilities of analysts. Sebi wants to specify the rating process, including the nature of compensation arrangements with rated entities, the policy for appeal by issuers, the confidentiality policy and the policy on outsourcing of activities and on managing conflict of interest. At present, CRAs make limited disclosures. Each CRA shall disclose on its website details of all ratings assigned by them, irrespective of whether the rating is accepted by the issuer or not, even in case of non-public issues.
