Markets

Mechanism to appeal against credit ratings on cards

PALAK SHAH Mumbai | Updated on May 24, 2018

SEBI to issue guidelines soon

Now companies that raise a dispute over credit ratings assigned to them by any credit rating agency (CRA) will have to be given a hearing. SEBI may soon issue guidelines with regard to how CRAs should set up an independent body to deal with appeals in case of dispute over ratings, a source told BusinessLine.

In several cases it has so happened that ratings issues by CRAs are challenged by companies. The trend picked up steam, especially after CRAs last year were forced to disclose to the public the ratings they had assigned to companies.

As of now, there are no stipulated rules about how appeals against assigned ratings should be handled. The companies just moved on to another CRA if they were not satisfied with the rating assigned to them by one. Or review of appeal by any company against ratings ended up with the same team or official that was involved in assigning the ratings to them.

In 2017, more than 700 companies challenged the ratings issued to them by CRAs, but there were no independent experts to dispose off such appeals.

Last year, a committee led by former RBI Deputy Governor R Gandhi recommended that CRAs set up an appropriate mechanism. However, instead of issuing a circular with regard to rules governing appeals, SEBI chose to wait for the committee’s second report on various other issues.

The circular, which SEBI has decided to release now, is likely to detail how and under what circumstances appeals can be raised and the manner in which it should be handled by independent experts.

Published on May 23, 2018

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