INDIA’S capital market regulator Tuesday tightened disclosure norms for Indian credit rating agencies in a bid to boost transparency and accountability after a number of sudden sharp corporate rating changes created concern among investors.

    Credit rating agencies will be required to publicly provide more details of the criteria and process behind rating changes and review each criteria periodically, the Securities and Exchange Board of India (SEBI) said.

    Agencies will also have to disclose details of ratings even if a rating is not accepted by a debt issuer, or if a review is not made by the time an updated rating is due, the SEBI said, adding the new guidelines need to be implemented by the agencies in the next 60 days.

    The SEBI said in cases where a debt issuer did not cooperate with an agency by withholding information or not paying fees, the agency would continue to rate the instrument based on the best available information and disclose the situation.

    India has many ratings agencies, including local arms of the big global operations. They mainly blame debt issuers for not cooperating with them and cite the fact that they can only give ratings based on what they know.

    Some agencies said the tighter guidelines were largely in line with expectations.

    “There was a lot of talk about rating agencies being given the option of suspending ratings due to non-cooperation, but the guidelines don’t say so, which is a very good development,” said a senior official at a rating agency, who declined to be identified.

    The tighter regulations follow sudden sharp downgrades debt securities of auto parts maker Amtek Auto Ltd. and Jindal Steel and Power Ltd. last year that hurt investors.

    The system of rating has long been challenged as agencies are paid by the companies whose securities they rate. Since the companies benefit from higher ratings, there is a direct conflict of interest between the rating agency and the issuer.

    Global regulators have been cracking down on credit rating agencies in the aftermath of the 2008 financial crisis, which many say was a result of inflated ratings assigned by agencies on complex mortgage-backed securities. (SD-Agencies)