New Delhi. Infrastructure Leasing and Financial Services (IL&FS) and Dewan Housing Finance Corporation Limited (DHFL) had shaken the country’s financial system by committing multiple defaults. But this will not happen in future.
Two major credit rating agencies of the country are taking the initiative to create a self-regulatory organization for this sector. CARE Ratings and Acuite Ratings & Research have formed a unit to formulate a common code of conduct and practices.
first time such initiative
This is the first time that a self-regulatory body has been formed for rating agencies in the country. The mutual fund industry, bond and currency dealers have already set up such self-regulatory bodies for themselves.Also read- Before availing EMI conversion facility on credit card, keep these four things in mind
According to sources, India Ratings (India Ratings) and ICRA (ICRA), which are invested by global rating companies, are also considering joining the proposed body. Both the rating companies will take a final decision after discussions with their parent foreign companies. India Ratings’ parent company is Fitch and ICRA’s Moody’s.
Other agencies will also join
India Ratings did not respond to ET’s queries regarding this. Icra said that this is a welcome step. If we get an offer to attend, we will consider it carefully and then take a decision on the basis of merit.
The Association of Indian Rating Agencies (AIRA) has been set up as a not-for-profit company and will work closely with regulators such as the Reserve Bank of India (RBI) and the Securities Exchange Board of India (SEBI).
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Ajay Mahajan, MD & CEO, Care Ratings said that ratings have become an important factor in the decision-making process in the financial world. Through this association, we aim to take all the stakeholders along for the development of the debt market. Acuite and CARE are founding members of this association but it is believed that they have invited other agencies to be a part of it as well.
IL&FS loan default started in 2018
Infrastructure financier IL&FS defaulted in repayment of loans and bonds one after the other in 2018. It started in August 2018. These shook the non-bank lending sector of the country. However, investors were not warned about the default risks. Since then, credit rating companies have started revamping their procedures.