MUMBAI, MAY 11: N Vaghul has stepped down as the chairman of Credit Rating Information Services of India (Crisil). This follows the observation of the Securities and Exchange Board of India (SEBI) that promoters with more than 10 per cent should not have any nominees on the credit rating agency boards.As Vaghul is also the chairman of ICICI Ltd, the main promoter of Crisil, he was forced to quit as chairman of Crisil. ICICI also holds over 12 per cent stake in Crisil. B V Bhargava, former managing director of ICICI, has become the chairman of Crisil in place of Vaghul. Incidentally, Vaghul was instrumental in floating Crisil (the first rating agency in India) in 1987.Similarly, A Lahiri, who is the managing director of Credit Analysis and Research (CARE), is also in the same situation as he is on deputation from IDBI which holds 26 per cent stake in the rating agency.Senior SEBI officials had recently expressed the view that promoters of rating agencies should keep an arm's length away from theiroperations. This is because promoters themselves are being rated by the rating agencies when they come out with bond or debenture issues. For example, when ICICI floats a bonds issue, it gets a rating from Crisil.``There were allegations in the past that rating agencies had given favourable rating to their promoters. While rating agencies have downgraded the rating of other companies, they have not done that in the case of their promoters. This is despite the deteriorating performance of some of the promoters,'' said a banker.SEBI was also in favour of limiting the promoters's stake in rating agencies to 5 per cent. At a SEBI meeting in March it was decided to direct the promoters to limit their stake in rating agencies to 5 per cent. The regulatory body is expected to stick to its earlier decision on restricting the rating agencies from rating its promoters, their subsidiaries and their associate companies in case the promoters' stake is more than the limit set by SEBI.However, the market watchdogcould only govern the rating of public issue and debentures, while the rating of fixed deposits (FDs), certificate of deposit (CDs) and private placement come under the RBI's purview. This means that rating of promoters' debt issues like FDs, CDs and private placement can still be done by rating agencies, irrespective of their equity stake.
