Credit rating practices in India: SEBI’s exemplary role
Credit rating agencies play a crucial role in the financial world by providing investors and businesses with valuable insights into the credit worthiness of issuers. Credit rating is an independent assessment of the creditworthiness of a business or government entity in general terms with respect to specific financial obligations such as a new bond issue.
In the aftermath of the 2008 financial crisis, there has been an increased scrutiny on credit rating agencies (CRA) due to concerns over their role in the crisis. The need for enhanced oversight became evident, and regulatory bodies across the globe responded by implementing significant reforms.
In the last few years, the regulatory environment for credit rating agencies has become more robust, with regulators focusing on independence, transparency and disclosure and increased oversight for increasing investor confidence. Additionally, the integration of Environmental, Social and Governance (ESG) considerations into credit rating frameworks has further improved transparency and risk assessment.
Indian regulator Securities and Exchange Board of India’s (SEBI) vigilant oversight and strong regulatory framework are the bedrocks of Indian thriving stock market ecosystem. SEBI fosters an environment conducive to long-term growth and helps to boost investor confidence by ensuring investor protection, promoting market integrity, and regulating various entities.
SEBI’s intension to stay vigilant is proven from its act of suspending the licence and winding up of the Bangalore based Brickwork Ratings within six months last year, a move unprecedented, even by international standards. The Indian regulator cited failure on the part of Brickwork Ratings to “exercise proper skill,
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