INSUBCONTINENT EXCLUSIVE:
that sparked a crisis in the non-banking finance sector.
The thinking is that such a move will resolve the conflict of interest inherent in
rating agencies being compensated by the issuers who raise debt, which has led to allegations of entities shopping around for a favourable
The regulator has sought feedback from market participants on its plan before coming up with the final rules, said the people cited
standing committee on finance had also called for an end to the practice
Those who use the ratings are institutional investors such as mutual funds, insurance companies, pension funds, banks and corporate
treasuries.
Under the proposed regime, an issuer will file a draft prospectus with the stock exchanges
Credit rating agencies will make their assessment of the paper
Investors will pay to see those ratings, based on a predetermined fixed rate
The initial and subsequent fees may have to be paid through the exchange platform
proposal.
Credit rating agencies that had assessed ILFS came under scrutiny after they failed to identify the financial trouble brewing
Before that, rating agencies were also blamed for not being able to predict the global financial crisis that stemmed in part from dubious
debt securities based on subprime housing loans.
Sebi is planning to amend its listing regulations, credit rating agencies regulations and
other guidelines to bring the new rules into effect, said the people cited above
