Sebi has issued a new framework for disclosures, which covers the process to be followed when the rating is not accepted by the issuer.
The regulator's announcement follows last year's consultation paper, issued in September last year. Sebi has said the majority of members on the review committee should be independent.
“Independent will mean people not having any pecuniary relationship with the CRA or its employees,” Sebi said.
The regulator has directed rating agencies to disclose all non-accepted ratings on their website for 12 months. Under the modified disclosure requirement, the CRAs will have to disclose the list of defaulters on a half-yearly basis. Further, it has asked CRAs to conduct internal audit with a panel of at least one chartered accountant and a certified auditor.
“Sebi expects an independent committee will bring fresh perspective if a client is not satisfied with the rating. However, how it works out remains to be seen, especially because there are strict timelines within which reviews have to be completed,” said an official of a ratings agency.
The complaint against ratings has increased in the past year, especially when CRAs were compelled to disclose ratings in public along with the rationale behind it.
Last July, Sebi had asked rating agencies to proactively monitor the financial health, including share price movement, of companies to provide timely and accurate ratings on their debts. The decision follows several instances of CRAs not taking cognizance of delays in servicing debt obligations by the issuers they rate, despite the information being discounted by the market.