Mumbai: After getting it badly from markets watchdog Sebi, credit rating agencies (CRAs) whose role in the bad loan implosion has been under scrutiny for years now, the Reserve Bank has blasted them for allowing low-rated companies to do "rating shopping". These CRAs had given IL&FS the highest rating of AAA, even when its subsidiary, IL&FS Transport Networks, defaulted in June. Rating shopping refers to how, a company or a debt paper manages to get same or better rating from another agency within three months of it getting a poor rating. The report notes that "most rating shopping happened around 'BBB' or lower graded instruments and has called for closer scrutiny of instances of rating shopping". The issue of possible rating shopping behaviour on the part of obligors clearly requires serious attention.

Source: Mint December 29, 2019 11:14 UTC