India markets regulator mulls allowing ratings agencies to rate instruments not regulated by it

India’s markets regulator on Wednesday proposed allowing credit ratings agencies to rate financial instruments regulated by other financial sector regulators.

Any agency that expands ratings to such instruments will need to set up a new unit within six months, the Securities and Exchange Board of India (SEBI) said in a consultation paper.

SEBI, under new chairman Tuhin Kanta Pandey, has signalled a more pragmatic approach to oversight and also relaxed certain regulations.

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Agencies that rate non-SEBI-regulated instruments must charge a fee for the same and maintain arm’s length from the business that rates SEBI-regulated entities, the regulator said.

“SEBI has been receiving feedback from the industry towards permitting credit ratings agencies to undertake rating of financial instruments under the purview of other regulators,” it said, including instruments such as unlisted securities.