Sebi Drafts Eligibility, Disclosure Norms For Credit Rating

India is set to become the first country to regulate credit rating agencies that rate debt instruments issued by promoters to raise money. The Securities and Exchange Board of India (Sebi) has already prepared draft regulations for the purpose.

We have debated the issue extensively and are discussing the issue with leading market players like the Crisil, said Sebi sources. The issue assumes significance in the light of the CRB fiasco.

The draft regulations cover the eligibility criteria for the rating agencies. They also specify the disclosures that rating agencies are supposed to make while rating an instrument.

A specific code will also be created for information dissemination by credit rating agencies to the market.

 

However, the norms are not expected to spell out a methodology for awarding a credit rating. It is not possible to dictate a methodology for credit rating agencies to finalise their ratings for instruments, said sources.

Sources said the parameters to regulate award of credit ratings were intensely debated. When one rates any instrument, one gives an opinion about it. There are other sources like the media which also express their opinion. How different is this view from the former? Credit rating is a structured way of giving an opinion. Regulations are not expected to hamper the independence of credit rating agencies as far as the methodology is concerned for credit rating, they said.