Not happy with state of affairs at rating agencies: Sebi chief

Capital markets regulator Sebi on Monday said it is "not happy" with the current state of affairs at credit rating agencies and will soon initiate public discussion for a new set of norms for them.

The comments come within days of the watchdog tightening disclosure norms for the credit rating agencies (CRAs) amid concerns about delayed rating action regarding debt-ridden firms.

"We are bringing out a discussion paper within a month," Tyagi said in reply to a question on how would Sebi deal with the situation if CRAs fail to adhere to the new set of stricter norms.

He further said the regulator will look at the views from all stakeholders before taking a final call. "We are not happy with the current state of affairs at the credit rating agencies," the Sebi chairman said in a strong message for CRAs which have been facing a lot of flak of late, especially with regard to limited warnings from their side about defaults made by companies on bonds, reports PTI.

Sebi asked CRAs last week to proactively monitor financial health, including share price movement, of companies to provide timely and accurate ratings on their debts. The decision followed several instances of CRAs not taking cognisance of delays in servicing debt obligations by the issuers they rate, even though the information has already been discounted by the market. Besides, the Securities and Exchange Board of India (Sebi) has increased disclosure requirements for CRAs and want them to monitor the exchange websites for disclosures made by the issuers. Sebi asked the rating agencies to carry out a review of the ratings upon the "occurrence of or announcement/news of material events", including financial results, any significant decline in share/bond prices of the issuer or group companies if it is not in line with the overall market movement and any attachment or prohibitory orders against the company.

Besides, the rating agencies would have to seek a 'No Default Statement' from the issuer at the end of every month.Under the new norms, CRAs have been asked to collect information and conduct monthly review of timely debt servicing. This monthly exercise would cover all borrowings, including NCDs, term loans and working capital.