The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) have held discussions to examine the business model of rating agencies. Under the proposals being considered, issuers of high-value debt would need to get mandatory dual ratings and invite bids to select a rating agency, while the agencies themselves must shield their rating committees from the management, who is directly involved in the discussions at the markets regulator. The aim is to prevent so-called ratings shopping, in which companies seek out the agency that promises the highest rating. Sebi has had a series of discussions with stakeholders to examine how to address the inherent conflict of interest in rating actions. Some proposals are not being taken forward, while some of them have found merit and acceptability amongst stakeholders.

(Live Mint)