Infra, robust economy to boost credit-rating biz in 10 yrs: Sebi

Market regulator the Securities and Exchange Board of India (Sebi) has said the credit rating agencies in India are likely to witness a surge in their activities in the coming decade on the back of robust economic growth and substantial investments in infrastructure.

In its latest monthly bulletin, the Sebi also said regulations governing the activities of credit rating agencies (CRAs) in the country would ensure a fair play for the sector.

"India will experience strong growth of financial markets over the next decade due to buoyant domestic demand and huge infrastructure investments," Sebi said.

This will translate into better business opportunities for CRAs in India, provided they function properly, the market regulator added.

CRAs are firms that provides investors with assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings.

According to the regulator, CRAs in India acted in a fairly responsible manner during the recent financial meltdown, unlike many other countries where they played a dubious role and aggravated the crisis.

"Prima facie, there is no immediate concern about the operations and activities of CRAs in India even in the context of the recent financial crisis," the market regulator quoted a recent report by the High Level Coordination Committee on Financial Markets.

India has taken steps to overhaul the regulatory framework for CRAs, in the wake of recent global financial meltdown to improve the quality of their services.

"India was among the first countries in the world to have formally adopted a regulatory framework for CRAs way back in 1999," Sebi said.

It added that the country has been introducing amendments to these regulations in line with the changing market conditions, the latest amendments being introduced in May last year.

"The regulations cover all aspects of CRAs functioning with respect to ownership, code of conduct, operations, conflicts of interests, etc and have served the market well over the last decade," it said.

CRAs are currently regulated by Sebi though there have been demands by other regulators to supervise some of their activities.

In this matter, Sebi said: "The CRAs should be registered and regulated by the regulator for securities market. They may acquire further accreditation with other regulators, if felt necessary, for rating products that come in their regulatory domain or that are used by their regulated entities."

Credit rating agencies like Standard & Poor's, Crisil, ICRA and CARE have operations in India.