India's market regulator chairman Ajay Tyagi said on Monday he was considering imposing more regulations on ratings agencies, days after announcing a set of tough new rules that the agencies must observe.
Regulators and market participants say the agencies were slow to adjust ratings on some companies that subsequently defaulted, including Amtek Auto Ltd in 2015. Their concerns have grown as markets have witnessed a record-setting surge in corporate bond sales.
"We are not happy with the current state of affairs of rating agencies," Tyagi told reporters in the sidelines of an event.
The Securities and Exchange Board of India said on Friday that under the new rules agencies must monitor more closely whether issuers are meeting their debt obligations, and increasing disclosure requirements.
Tyagi said the regulator was considering a further set of proposed regulations, adding it would issue a discussion paper "within a month." He did not provide any specifics.
Rating agencies on Monday declined to comment on SEBI's proposals.
A source at one of India's four major rating agencies said that the timing of the rules had come as a surprise and that the company was still "trying to figure what this would mean for us."
He said the company would contact SEBI for additional clarifications and was not aware of any pending regulations.
India has four major rating agencies, of which three are majority-owned by the big three global agencies - Standard & Poor's, Fitch Ratings and Moody's Investors Service. But they operate independently of their parent companies with different rating standards.
Corporate bond issuance surged 37.2 percent to 2 trillion rupees in the first half of 2017, the highest first-half figure since records began in 2000, according to Thomson Reuters data.
Late last year, SEBI tightened disclosure norms for credit rating agencies in a bid to boost transparency and accountability.
Global regulators have been cracking down on credit rating agencies in the aftermath of the 2008 financial crisis, which many say was a result of inflated ratings assigned by agencies on complex mortgage-backed securities.
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