Parliamentary panel wants probe into LIC role in IL&amp;FS case
Calling for urgent measures to revive IL&FS while noting that it is the "only major institution funding the infrastructure projects in the country" the Parliamentary Standing Committee on Finance said the governance failures and indecision on the part of the IL&FS Board should also be thoroughly probed. In its recommendations, the panel suggested the implementation of mandatory rotation of CRAs to "bring more accountability among the credit rating agencies as they will be wary of committing negligence".
"In order to have more vibrant functioning of domestic capital and money markets and enhancing credibility in the credit rating industry, we feel the mandatory rotation of CRAs may be implemented," the report stated. The recommendation comes as the panel in the report highlighted that the credibility of credit rating action has "come into sharp question" in the crisis involving IL&FS.
As 'rating' of an instrument or entity is being increasingly relied upon by capital markets, bankers and investors and, since it constitutes a key input for financial decision-making of far-reaching magnitude, the committee stressed the need for the rating process to be "absolutely professional".
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