The Securities and Exchange Board of India (Sebi) has asked credit rating companies to define on what basis they rate companies and how the rating process is carried out.
The Securities and Exchange Board of India (Sebi) on Tuesday asked credit rating agencies to frame detailed rules for rating criteria, processes and responsibilities of rating analysts and increase the range of their disclosures. Raters have 60 days to adhere to these norms.
The capital markets regulator asked rating companies to define on what basis they rate companies and how the rating process is carried out. This would include a clear set of criteria for analyzing financial ratios, treatment of consolidation of firms, parent group’s support, nature of business and so on while rating any instrument.
Sebi said that every such rating has to be reviewed periodically and disclosed publicly. Any change in the rating process or policies also has to be disclosed by a rater on its website along with the original provision so that investors can understand the changes.
Sebi also asked raters to make a complete and timely disclosure about the rationale for rating changes and the history of ratings for all instruments issued by the company so that investors are able to take an informed decision while dealing in any security associated with the same company or its group firms.
Disclosures on ratings and ratings changes have to be made on a standard format press statement. In such releases, the rater has to disclose the history of all instruments from the issuer it rated in the past three years.