Now, credit rating agencies form association

All the credit rating agencies in the country have formed an association, which will act as a non-profit organisation (NPO). Information to this effect was given by CARE Ratings in a filing to the Bombay Stock Exchange (BSE) after it was approved by its board in a meeting held on June 12.

We already have such organisations for various industries like banks (IBA), fund houses (AMFI), general insurers (GI Council) and life insurers (LI Council). The NPO will be known as Association of Indian Rating Agencies (AIRA), which will be headed by CARE Ratings' MD & CEO, Ajay Mahajan. The CARE Ratings has proposed to invest up to a sum of Rs 52,500 into the NPO. His Chairmanship shall be by rotation amongst the members of NPO entity. The NPO will be having an authorized share capital of Rs 500,000 and a paid-up capital of Rs 105,000.

The company is a Credit Rating Agency (CRA) registered with SEBI. Last two years have been difficult and turbulent for the CRA industry. The industry has taken, along with regulators, several steps to enhance the standards of ratings, its disclosures standards and processes. However, the absence of a representative body in the industry has proved detrimental to confidence building amongst all stakeholders. Hence, NPO entity has been incorporated by few CRAs to meet the below minimum objectives, amongst others.

The NPO's job will be to interact with SEBI and to represent to SEBI on all matters concerning the rating industry. Also, it will represent to the Government of India and its Ministries and Departments, RBI and other bodies on all matters relating to the rating industry. The association will disseminate information on rating industry and to undertake studies and research directly and/or in association with other bodies.

Besides, it will develop and maintain cooperative efforts that promote interaction and exchange of ideas, information, knowledge and skills among credit rating agencies in India and that would enhance their capabilities and their role of providing reliable market information. Moreover, AIRA will undertake activities aimed at promoting the adoption of best practices and common standards that ensure high quality and comparability of credit ratings across agencies, following the highest norms of ethics and professional conduct.

NPO entity has been incorporated on receipt of Certificate of Incorporation from the Registrar of Companies, Maharashtra, Mumbai. There is no further regulatory approval required for acquisition of shares of NPO entity. The company will be allotted Equity Shares on payment of share application money and shall subsequently receive

Share Certificate(s). Acquisition amount shall be based on nominal value of shares or Rs 10 each of the 5,250 equity shares which comes at 50 per cent of initial shareholding of the NPO entity is proposed. The ratio of number of equity shares and/or percentage shall decline once other Credit Rating Companies become members of the NPO entity.