How companies continue to cherry-pick credit ratings

Regulatory loopholes allow companies to pick ratings that are most favourable, skewing the basis for investment and lending decisions.

Despite several regulatory reforms over the last few years, the spectre of rating shopping continues to loom over India.

Since the collapse of the Infrastructure Leasing and Financial Services group in 2018-19, regulators have introduced several new rules to improve practices within the credit rating industry. It was revealed that credit rating agencies were influenced by IL&FS executives to provide preferable ratings. That was the most egregious episode of how rating agencies were corrupted by their powerful clients. 

The Securities and Exchange Board of India introduced several new rules on rating agencies with regard to their fee structure, ability to …

Author

Advait Palepu

Advait is a financial journalist and a former writer at The Morning Context. Here, he wrote on India’s banks, the wider financial services industry and the fintech ecosystem. He has previously worked with the Economic and Political Weekly, Business Standard, BloombergQuint and MediaNama, where he covered everything from the Reserve Bank of India to fintech policy.

Writer

advait@mailtmc.com

Mumbai