SEBI Modifies Withdrawal Norms For Credit Rating Agencies

On Friday, the Securities and Exchange Board of India (SEBI) said that credit rating agencies (CRA) are required to issue INC (Issuer Not Co-operating) ratings for companies that do not co-operate with disclosure of loan defaults.

"If an issuer has all the outstanding ratings as non-cooperative for more than six months, then the CRA shall downgrade the rating assigned to the instrument of such issuer to non-investment grade with INC status. If non-cooperation by the issuer continues for further six months from the date of downgrade to non-investment grade, no CRA shall assign any new ratings to such issuer until the issuer resumes cooperation or the rating is withdraw," said SEBI in a circular.

In November, SEBI mandated listed companies to make public disclosure on stock exchanges about payment defaults of interest obligations on loans, including revolving facilities like cash credit from banks or financial institutions beyond 30 days.

Defaults in case of unlisted debt securities are also required to be disclosed by companies within 24 hours of the occurrence of such a default.

In case of multiple ratings on an instrument, where there is no regulatory mandate for multiple ratings, a CRA will have to withdraw a rating earlier provided the CRA has rated the instrument continuously for three years or 50 percent of the tenure of the instrument, whichever is higher and received a no-objection certificate from 75 percent of bondholders of the outstanding debt for withdrawal of rating.

The regulator also said that at the time of withdrawal, the CRA should assign a rating to such instrument and issue a press release mentioning the reason for withdrawal of rating.