Page 215 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Indian Financial System

Notes 10.1.11 Rating Process

1. Every credit rating agency has to:
(i) specify the rating process;
(ii) file a copy of the same with the Board for record; and file with the Board any
modifications or additions made therein from time to time.
2. Every credit rating agency shall, in all cases, follow a proper rating process.
3. Every credit rating agency shall have professional rating committees, comprising members
who are adequately qualified and knowledgeable to assign a rating.
4. All rating decisions, including the decisions regarding changes in rating, are taken by the
rating committee.

5. Every credit rating agency has to be staffed by analysts qualified to carry out a rating
assignment.
6. Every credit rating agency has to inform the Board about new rating instruments or
symbols introduced by it.
7. Every credit rating agency, has to, while rating a security, exercise due diligence in order
to ensure that the rating given by the credit rating agency is fair and appropriate.
8. A credit rating agency cannot rate securities issued by it.
9. Rating definition, as well as the structure for a particular rating product, cannot be changed
by a credit rating agency, without prior information to the Board.
10. A credit rating agency has to disclose to the concerned stock exchange through press
release and websites for general investors, the rating assigned to the securities of a client,
after periodic review, including changes in rating, if any.

10.1.12 Restriction on Rating of Securities Issued by Promoters or by
Certain Other Persons

Definitions

In this unit, unless the context otherwise requires:
1. "associate" , in relation to a promoter, includes a body corporate in which the promoter
holds ten percent or more, of the share capital;

2. "promoter" means a person who holds ten percent or more, of the shares of the credit
rating agency.

Securities Issued by Promoter

1. No credit rating agency can rate a security issued by its promoter.
2. In case promoter is a lending institution, its Chairman, director or employee cannot be a
Chairman, director or employee of credit rating agency or its rating committee.
3. Securities issued by certain entities, connected with a promoter, or rating agency not to be
rated:
(a) No credit rating agency can, rate a security issued by an entity, which is:

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