Exim Bank favours new global rating system

Pointing to conflict of interest in the current framework of getting rated, the Exim Bank favoured a new credit rating agency by the BRICS group as an alternative, saying it will make cost of borrowing much cheaper.

"We are very happy the Finance Ministry is looking at these issues. The BRICS leadership, which meets here over the next two days, will take a firm view and provide guidance on the next steps," Exim Bank Chairman Yaduvendra Mathur told PTI.

"I am AAA-rated domestically, but that doesn't survive overseas. We want more granularity," he said.

Expressing strong concerns on the way existing agencies go about rating in the current context, he said: "We look at with dismay that the strong economic growth of India is still not captured in the ratings that we get while we raise the money through overseas bonds." Without naming the global biggies - S&P, Fitch and Moody's - which dominate the sovereign rating business, Mathur said the top three global agencies control 90 percent of the market and make the issuer pay for the rating rather than the investor which may lead to concerns over possible conflicts of interest.

"There is definitely space and opportunity for an alternative rating architecture," he said.

The Indian proposal to start a rating agency after the setting up of the BRICS-backed New Development Bank, has found favour with other members of the grouping and hence, increases expectations from the eighth BRICS summit, he said.

Mathur was speaking on the sidelines of a two-day BRICS Economic Forum being held in run-up to the summit of the heads of government/state in the coastal state. The BRICS group comprises Brazil, Russia, India, China and South Africa.

He dismissed suggestions of these entrenched agencies starting a new entity to take care of such concerns, saying the parentage needs to change as such an entity may also look at issues similarly.

The solution will have to be left to technical experts, he said, conceding that who promotes the new rating agency will still be an issue.