The Reserve Bank of India (RBI) on Wednesday restrained banks and other financial entities from appointing Brickwork Ratings India for obtaining fresh rating with immediate effect. The central bank also said it will separately issue instructions on the existing ratings issued by the rating agency.
The RBI directive comes after the Securities and Exchange Board of India (Sebi) cancelled Brickwork Ratings’ licence to operate as a credit rating agency for allegedly not following proper rating process, procedural lapses and conflict of interest. Sebi has directed Brickwork Ratings to wind up operations in six months.
Brickwork Ratings, which received licence in 2008, is one of the seven credit rating agencies registered with Sebi. The others are Crisil, ICRA, CARE, Fitch, Infomerics Ratings and Acuite Ratings & Research. The markets regulator had conducted a joint inspection with the RBI of the records and documents of Brickwork Ratings between January 20 and 24, 2020.
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The Sebi action on Brickwork Ratings is seen possibly as the first instance by the regulator of cancelling the licence of a credit rating agency.
In its order dated October 6, Sebi highlighted several violations by Brickwork, including failure to follow a proper rating process and exercising due diligence while according ratings.
Sebi has barred the agency from taking any new clients.