Sebi eases disclosure norms for rating agencies

To safeguard investors’ interest, Sebi today asked credit rating agencies to give a 30-day notice before withdrawal of ratings in case of open-ended mutual funds, even as it relaxed various disclosure norms for the CRAs. The decision has been taken in consultation with (credit rating agencies (CRAs) and representations received from the industry. Sebi said withdrawal of rating of is permitted in case of open ended mutual fund scheme, being perpetual in nature and having no specified maturity. Besides, such facilities are allowed in bank loans.

“However, as units of such schemes are held by many investors, such ratings shall be placed on notice of withdrawal for at least 30 days, which shall be publicly available on the CRA’s website,” Securities and Exchange Board of India (Sebi) said in a circular. It further said that ratings can be withdrawn after receiving request for withdrawal from the asset management company in case of mutual funds. In case of bank facilities, ratings can be withdrawn on request from the borrower along with no-objection from the lending bank.

At the time of withdrawal, the credit rating agencies would have to assign a rating to such security in a prescribed format and also mention the reason for such action. Sebi said rating agencies will not have to provide details about coupon rate for all types of bank loan facilities, maturity details for working capital facilities, tranche-wise interest rate and maturity details for money market instruments such as commercial papers, certificate of deposit and short-term NCDs which are re-issued frequently.

However, the range of duration of these instruments will be provided. Sebi said that rating outlooks will not be assigned for, short term ratings, ratings in the C and D categories and ratings on watch and credit quality ratings of mutual fund schemes, provided surveillance of the funds holdings is carried out by the CRAs on a monthly basis. Besides, ratings of securitisation transactions backed by pool of loans, will not be assigned as CRAs are already mandated to disclose, at least once in every six months, the performance of the rated pool.

Securities and Exchange Board of India ( SEBI )