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Unit 10: Credit Rating and Consumer Finance

Notes
Did u know? What are the conditions where certificate is not granted?
If, after considering an application, the Board is of the opinion that a certificate should not
be granted or renewed, as the case may be, it may, after giving the applicant a reasonable
opportunity of being heard, reject the application.
10.1.3 Effect of Refusal to Grant Certificate

An applicant whose application for the grant of a certificate has been rejected, shall not undertake
any rating activity.

If the Board is satisfied that it is in the interest of the investors, it may permit the credit rating
agency to complete the rating assignments already entered into by it, during the pendency of
the application or period of validity of the certificate.

The Board may, in order to protect the interests of investors, issue directions with regard to the
transfer of records, documents or reports relating to the activities of a credit rating agency,
whose application for the grant or renewal of a certificate has been rejected.
The Board may also appoint a person to take charge of the records, documents or reports
relating to the rating activities of a credit rating agency and for this purpose also determine the
terms and conditions of such appointment.

10.1.4 Code of Conduct

Every credit rating agency has to abide by the Code of Conduct contained in the Third Schedule.
Every credit rating agency has to enter into a written agreement with each client whose securities
it proposes to rate, and every such agreement shall include the following provisions, namely:
1. the rights and liabilities of each party in respect of the rating of securities shall be defined;
2. the fee to be charged by the credit rating agency shall be specified;

3. the client shall agree to a periodic review of the rating by the credit rating agency during
the tenure of the rated instrument;
4. the client shall agree to cooperate with the credit rating agency in order to enable the
latter to arrive at, and maintain, a true and accurate rating of the clients securities and shall
in particular provide to the latter, true, adequate and timely information for the purpose;

5. the credit rating agency shall disclose to the client the rating assigned to the securities of
the latter through regular methods of dissemination, irrespective of whether the rating is
or is not accepted by the client;
6. the client shall agree to disclose, in the offer document:
(i) the rating assigned to the client's listed securities by any credit rating agency during
the last three years; and
(ii) any rating given in respect of the client's securities by any other credit rating agency,
which has not been accepted by the client;

7. the client shall agree to obtain a rating from at least two different rating agencies for any
issue of debt securities whose size is equal to or exceeds, rupees one hundred crores.

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