Rating agencies’ ineffectual functioning must be reformed – The Hindu BusinessLine

Faulty assessments by credit rating agencies have played a big role in Indian investors getting singed by a series of bond market blow-ups in the last couple of years. It is therefore about time that the Securities Exchange Board of India (SEBI) initiated direct penal action against rating agencies for their role in these episodes, instead of merely tightening regulations and disclosure norms. In orders passed last week, SEBI has upbraided ICRA, CARE and India Ratings for their ‘lethargic indifference’ and lack of due diligence in assessing IL&FS, and imposed fines of ₹25 lakh each. But this seems to let the agencies off the hook rather lightly, considering that over ₹90,000 crore of borrowed funds are hanging fire in the IL&FS case alone. For more effective deterrence, SEBI ought to levy penalties that are at a multiple of the rating fees and consider suspending the licenses of agencies found to be repeatedly remiss in their duties

via Rating agencies’ ineffectual functioning must be reformed – The Hindu BusinessLine