CARE Ratings is one of the credit rating agency that rates debtors on the basis of their ability
to pay back their interests and loan amount on time and the probability of them
defaulting.
To know more about : What are crediting rating agencies and How manyrating companies are there in India?
To know more about : What are crediting rating agencies and How manyrating companies are there in India?
In the
recent past, we have seen the rating companies downgraded the ratings of the
companies such as ILFS from AA+ (investment grade) to BB (below investment
grade) after the scam have come into light. CARE is also one amongst the rating agencies who had downgraded their ratings.
Many companies with
high credit rating, including Dewan Housing FinanceNSE -4.84 % (DHFL), have
faced stress since then, putting a question mark on the quality of processes
and decision-making at rating firms.
In light of above circumstances, CARE has hired EY to examine whether there were lapses on its part
in assigning ratings, not only to Infrastructure Leasing & Financial
Services (IL&FS) but also to a larger universe of companies.
“This forensic audit is
not exactly related to IL&FS but pertaining to the anonymous complaint, as
the regulator believes CARE should make the outcome transparent,” said one of
the persons of EY. “The audit may be completed by the end of this quarter.”
In July,
CARE sent its chief executive officer (CEO) Rajesh Mokashi on forced leave
after an anonymous complaint to the Securities and Exchange Board of India
(Sebi) alleged that rating decisions were influenced.
As part
of the audit, EY officials have been looking into text messages on the mobile
phones of top officials, their emails, and laptops. The outcome of the audit
will decide Mokashi’s continuation at CARE.
“If the
audit report does not find any deviation, Mokashi would be reinstated,” said a
senior executive with knowledge of the matter. The CARE board appointed TN Arun
Kumar, incumbent executive director (ratings), as interim CEO of the company.
He will not be a part of
rating operations to ensure that the rating process is unbiased.
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