SEBI to finalise new norms for advisers, credit rating agencies

MUMBAI: The board of the Securities and Exchange Board of India (Sebi) will consider and approve on December 28 as many as 17 reforms, including new norms for credit rating companies and investment advisers, according to two people with direct knowledge of the development.

“We are re-looking all regulations and ensuring that all circulars are captured in regulations,” Ajay Tyagi, chairman of Sebi, said at a December 20 event.

The Sebi board will also discuss the issue of disclosure of loan defaults and publish a discussion paper on it.

In August, Sebi had mandated that listed firms disclose all loan defaults within a day. It withdrew the directive on September 30, a day before it was to take effect, citing feedback from banks and industry that it needs a granular definition of loan default.

Mint could not ascertain the details of the new norms but one of the two people cited above said that Sebi could take a discussion paper approach.

“If Sebi ensures that technical defaults are not taken as a benchmark for disclosures, then the move will help in enhancing transparency,” said an official with a public sector bank who did not wish to be named.

“Sebi board proposes to cap cross-holding among credit rating agencies (CRAs) at 10%, and have stringent net worth and ownership criteria,” said the first person cited earlier.

Currently there is no shareholding cap in rating agencies. The expected norms will also restrict individual shareholders and they cannot have a 10% (or more) stake in two rating agencies. The regulator would also increase the minimum net worth required to start a credit agency. Currently, it stands at ₹5 crore.

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