Capital market regulator Sebi said it is “not happy” with the current state of affairs at credit rating agencies and will soon float a discussion paper for a new set of norms for them.
This follows within days of the watchdog tightening the 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,” Sebi’s Chairman Ajay Tyagi said in reply to a question on how would Sebi deal with the situation if the rating agencies fail to adhere to the new set of stricter norms.
Tyagi 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 the CRAs which have been facing a lot of flak lately, especially with regard to limited warning from their side about defaults by companies on bonds.
Last week, Sebi asked the CRAs 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 the 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 the 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 each month.