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CARE Ratings has taken the lead to incorporate an “Association of Indian Rating Agencies” to build confidence amongst all stakeholders.
The association has been incorporated as the absence of a representative body in the industry has proved detrimental to confidence building amongst all stakeholders.
Hence, the association has been incorporated as a non-profit organisation (NPO) by a few CRAs, CARE Ratings said in a regulatory filing.
“The last two years have been difficult and turbulent for the CRA industry. The industry has taken, along with regulators, several steps to enhance the standards of ratings, its disclosures standards and processes,” the CRA said.
While CRAs are expected to give forward looking opinions on the ability and willingness of a borrower to pay his dues in full and on time, they got flak for their failure to do so in case such as IL&FS and DHFL.
The objectives of the association include interaction with the Securities and Exchange Board of India (SEBI) and to represent the market regulator on all matters concerning the rating industry.
It will represent to the Government of India and its Ministries and Departments, the Reserve Bank of India (RBI) and other bodies on all matters relating to the rating industry.
Further, the association intends to disseminate information on rating industry and to undertake studies and research directly and/or in association with other bodies; and develop and maintain cooperative efforts that promote interaction and exchange of ideas, information, knowledge and skills among credit rating agencies in India that would enhance their capabilities and role of providing reliable market information
Additionally, the NPO will undertake activities aimed at promoting the adoption of best practices and common standards that ensure high quality and comparability of credit ratings across agencies, following the highest norms of ethics and professional conduct.
The association has been floated with an Authorised Share Capital of Rs 5 lakh and a paid-up capital of Rs 1.05 lakh.
CARE Ratings MD & CEO Ajay Mahajan is the first Chairman of the Association. The Chairmanship will be by rotation amongst the members of the NPO entity.
The agency said it proposes to acquire 5,250 equity shares -- 50 per cent of initial shareholding of the NPO entity. The ratio of number of equity shares and/ or percentage will decline once other CRAs become members of the NPO entity, CARE said.
Currently, seven CRAs are registered with SEBI -- CRISIL Ratings, ICRA, CARE Ratings, India Ratings and Research, Brickwork Ratings, Acuite Ratings and Research, and Infomerics Valuation and Rating.
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