Rating Agencies, Rbi Differ On Methodology
Credit rating agencies are in a fix after being asked by the Reserve Bank of India (RBI) to standardise rating methodology for the non-banking finance companies (NBFCs).
How does the RBI expect us to standardise opinion, the official of a rating agency said here yesterday.
The apex bank had asked all the four credit rating agencies to work out a standard mechanism to rate NBFCs at a meeting yesterday. Stating that opinion varied and could not be standardised, the agencies said ratings depended on the risk perceptions of a rating agency, the official said.
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Nothing concrete has emerged out of the meeting of the RBI with Crisil, Icra, Care and Duff & Phelps, he added. The agencies are now awaiting further directions from the RBI.
According to an RBI spokesperson, deputy governor S P Talwar briefed the rating agencies on what was expected of them in the light of the role they would be playing in the operations of the NBFCs.
While rating a finance company, if one rating agency says safety is sufficient, and other says its adequate, it will create confusion in the minds of investors, the RBI official said, adding that rating should be done in a manner which is uniformly understood.
The RBI has asked the rating agencies to continuously interact with it and also apprise it of any rating reviews/downgrading undertaken for any NBFC.
In the new norms announced for the finance companies on January two, the RBI gave a central role to the rating agencies by linking credit rating to the quantum of funds that could be raised by the finance companies.
RBI has made lowest credit rating of A and minimum net owned funds of Rs 25 lakh mandatory for the NBFCs to raise public deposits.
Industry associations have decried the overemphasis laid on credit rating for their operations