On November 1, 2016, the Securities and Exchange Board of India issued a circular containing Enhanced Standards for Credit Rating Agencies. These seek to introduce greater stringency in the operation of the rating industry. The areas covered include:
- Formulation of Rating Criteria and rating processes and public disclosure of the same.
- Accountability of Rating Analysts.
- Standardisation of Press Release for rating actions.
- Functioning and evaluation of Rating Committees/Sub-Committees.
- Disclosure of ratings in case of non-acceptance by an issuer.
- Disclosure in case of delay in periodic review of ratings.
- Policy in respect of non-co-operation by the issuer.
- Strengthening and enhancing the relevance of Internal Audit of CRAs, viz. appointment and rotation of auditors and scope of the audit.
The credit rating agencies are required to implement these enhanced standards within 60 days from the date of the circular.
Although these changes have imposed onerous requirements on rating agencies, some believe they do not go far enough.