On the positioning of CARE Group going ahead
I would like to position CARE Ratings
as the most preferred credit rating agency. And the fact that we have no foreign lineage means we need to reinforce faith and confidence among customers, regulators, government departments and the media. CARE is already much respected in terms of the quality of ratings. The last couple of years have been disruptive, given the crisis in shadow banking; and the sharp downgrades and defaults. Credibility first, and growth next is the paradigm that I believe in.
I expect non-performing assets (NPAs) to build up and we will know of its extent only after the moratorium
ends. It remains to be seen whether restructurings will be permitted across-the-board or only in some critical sectors. At worst, I see NPAs
increasing by about five per cent over the current 9-10 per cent from unsecured and partly-secured retail exposures.
On access to Central Repository of Information on Large Credits (CRILC) for rating agencies
While there is the argument that rating agencies should indulge in ex ante studies and not ex post, the reality is that unlike capital market instruments, where one-day late is construed as default, the same doesn’t necessarily work in bilateral bank loan business. This needs to be thought through by all concerned, and there is need for giving access to the CRILC so that delays are transparently shared with the rating agencies as they carry the responsibility of guiding investors not only with distance-to-default on an ex ante basis, but also in the event of default.
On the ‘investor-pays’ model for ratings
The general consensus is that the ‘issuer-pays’ model is the best and most feasible. And these ratings can be tracked on the website. In an ‘investor-pays’ model, what happens when the initial investor sells the instrument to another investor who may or may not want the rating? The general public cannot see the ratings and hence, we think the answer lies in the current model being made more robust and transparent than a switch to ‘investor pays’.