The Securities and Exchange Board of India (SEBI) has penalised rating agencies India Ratings & Research, CARE and ICRA for alleged lack of proper due diligence while rating non-convertible debentures of crisis-hit IL&FS.
In three separate orders, the SEBI imposed a penalty of ₹25 lakh each on them. “Though there is no allegation of any mala fide on the part of the Noticee, the failure by the Noticee is blameworthy and serious considering the degree of responsibility bestowed upon it by the statute,” said the orders. “Further, in the peculiar facts and circumstances of this case, the default has occurred due to lethargic indifference and needless procrastination and laxity of the Noticee...
“The brazen failure had clearly defeated the purposes of the regulations i.e. investor protection and orderly development of the securities markets... the default is grave and the gravity of this matter cannot be ignored.” The SEBI probe has alleged the agencies placed excessive reliance on the submissions made by the IL&FS management while failing to change the rating or placing it under ‘watch’ even as there were reports related to the slow pace of asset monetisation and deleveraging of the group.
The regulator has also alleged that the rating agencies failed to consider latest financials in the rating committee note presented on October 27, 2017.
