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”.
It can be noted that rating agencies have been largely blamed for their lax policies and oversight for the 2008 global financial crisis, which primarily spawned from junk-type mortgage bonds and their derivatives worth trillion of dollars that the Wall Street bankers invented and hawked across the globe to get AAA ratings and finally imploded.
Back home, a fortnight before IL&FS went belly up in September 2018, rating agencies India Ratings, Icra and Care had given its debt papers AAA/AA+ ratings.
This finally had the Sebi last Friday penalising Icra, Care and India Ratings Rs 25 lakh each for their “lapses in their duty to investors by not taking timely action” when they rated NCDs of IL&FS which owes close to Rs 1 lakh crore to the system. Sebi also found the agencies guilty of excessively relying on assertions of the IL&FS management.
These CRAs had given IL&FS the highest rating of AAA, even when its subsidiary, IL&FS Transport Networks, defaulted in June.