According to SEBI (Credit Rating Agencies) Regulations, 1999, a credit rating agency (CRA) shall not offer fee-based services to the rated entities, beyond credit ratings and research.

Further, SEBI Guidelines require a CRA to disclose annually :

(a) Its total receipt from rating services and non-rating services,

(b) Issuer wise percentage share of non-rating income of the CRA and its subsidiary to the total revenue of the CRA and its subsidiaries from that issuer, and

(c) Names of the rated issuers who along with their associates contribute 10% or more of total revenue of the CRA and its subsidiaries.

The aforesaid provisions have been made to avoid any conflict of interest and to ensure arm’s length relationship between credit rating activity and other activities of CRA.

As per available records, no rating agency has opposed the aforesaid guidelines.

This was stated by Minister of State for Finance, Shri Namo Narain Meena, in written reply to a question in the Lok Sabha today.

Credit rating agency conflict of interest rules prohibit fee based non rating services and require annual transparency disclosures to preserve independence. SEBI regulations prohibit a credit rating agency from offering fee based services to rated entities beyond credit ratings and research to avoid conflicts of interest. CRAs must annually disclose total receipts from rating and non rating services, issuer wise percentage share of non rating income relative to revenue from that issuer, and names of rated issuers (with associates) whose contributions reach a material revenue threshold for the CRA and its subsidiaries.