SEBI has directed credit ratings agencies such as CRISIL, ICRA and BrickWorks not to withdraw their ratings abruptly. However, these companies can suspend ratings only if they have rated an instrument for at least five years or 50% of its tenure.
This is in the wake of abrupt rating downgrades of Amtek Auto, JSPL and Bhushan Steel and Ballarpur Industries in which credit ratings agencies had either suspended their ratings or downgraded ratings abruptly.
Earlier, SEBI had cautioned fund houses on debt fund management and advised them to be careful while investing in debt instruments. The market regulator had advised fund houses not to rely on credit rating agencies and develop an in-house credit assessment team to mitigate such risks.
SEBI, in its board meeting, has also instructed credit ratings agencies to increase their net worth from Rs.5 crore to Rs.25 crore. In addition, credit ratings agencies cannot hold over 10% in other rating companies. However, this restriction is not application for pension funds, insurance schemes and mutual fund schemes.
