SEBIï¿½s new framework for financial disclosure by credit rating agencies may not be enough. Examine.
The various credit rating agencies of the country have been asked by the Securities and Exchange Board of India to present their probability of default of all the instruments which they have earmarked for the benefit of the investors. About 163 debt instruments have been downgraded this year. This is more than twice the number of defaults which occurred last year. It is this growing number of defaults over last year which has pushed the SEBI to pull its whip on the credit rating agencies. SEBI has set forth a new framework for the financial disclosure by these agencies which will improve the quality of information which is furnished by these agencies to their investors. The agencies will have to publish all the information about their performance in rating of the instruments in comparison with the benchmark in consultation with SEBI. The recent regulations point towards the disappointment of SEBI with these agencies as the latter have been found to be more loyal to the companies whose instruments they support and not the investors. The framework will align the agencies with the global best practices.