Sebi to vet rating agencies' processes, issue new guidelines

Is planning to do away with in-person verification while investing in MFs

The processes followed by rating agencies while rating papers are under the radar of Securities and Exchange Board of India (Sebi). 

"Why in certain cases the rating is suddenly suspended has to be explained. We have explained our concerns to rating agencies. There are also concerns of conflict of interest," said UK Sinha, at the FICCI, capital markets summit.

Sebi plans to issue new guidelines for process followed by rating agencies in ‎coming months. Regulator is also watchful of instances where there are concerns of conflict of interest between the rating agency and the paper.

Recently, the schemes of a fund house were hit due to ‎rating downgrade of an auto component manufacturing company. Sebi is working on guidelines to keep a check on concentration risk of mutual funds while investing in a debt paper.

The regulator is also planning to do away with the requirement of in-person verification while investing in mutual fund products. This move, as per the regulator, would help in increasing mutual fund penetration and enable sale of financial products through e-commerce platforms.

Sebi has had three rounds of meetings so far with a panel headed by Nandan Nilekani to revamp distribution of financial products.