Moneycontrol News
The Securities and Exchanges Board of India may soon allow issuers of debt to contest ratings by credit rating agencies. The proposal was approved at the regulator’s board meeting in December last year, but a circular has not been formally issued yet.
Once the circular is issued, companies issuing debt can seek a review of ratings assigned to their bonds if they are dissatisfied, sources told Moneycontrol.
The consultation paper, which first mooted it in September last year, stated that in the event of an appeal, “a rating committee of the CRA that shall be different from the rating committee that had initially assigned the rating to the instrument(s) and shall consist of a majority of independent members” would look into it.
In the past, companies have complained against CRAs after ratings on their debt were suddenly downgraded or withdrawn.
Companies can now approach the CRA with more supporting documents to stake a claim to a better rating.
CRAs, on the other hand, say companies often do not provide full disclosures, leading to ratings based on inadequate information.
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