Sebi for continued rating of errant cos
MUMBAI: The Securities and Exchange Board of India (Sebi) is not in favour of a demand from credit rating agencies (CRA) to let them withdraw ratings of uncooperative companies that fail to provide required information, two people aware of the matter said.
The regulator wants the ratings to continue, since withdrawing them would leave investors with even less information, the people said, requesting anonymity.
Regulations require CRAs to keep every credit instrument rated all through its lifetime. They can be withdrawn only if a bank issues a no-objection certificate, 75% of bond issuers agree, or if the instrument/loan has been assigned a ‘D’ or default rating.
Rating agencies last week wrote to Sebi and Reserve Bank of India (RBI) that they wish to stop rating credit instruments and bank loans of un-cooperative issuers. They argued that rating without complete information renders the entire exercise futile.
“There are many instances where the issuers are not cooperating and are not giving critical information. In that case, continuing to rate the instrument purely based on information available in public domain becomes difficult and it does not give the investors the right picture of the ability to repay/ default,” said Sankar Chakraborti, chief executive officer, Acuite Ratings.
However, Sebi does not seem to think that way.
A request for comment from Sebi was not immediately answered .