Page 25 - Souvenir - v4 (2)

Rating the Raters : Awakening the Credit Rating Agencies in the Post-Pandemic Scenario
-Dr. Mausumi Bhattacharyya
Associate Professor
Dept of Commerce
Serampore College(CU)

Across the globe, humankind is constantly battling with multiple risks, right from the loss of bio-diversity to climate
change, risk of food security to economic bankruptcy or to the aggression on one's cultural identity and so on. The

latest among the risks is the threat to our life and livelihood by an invisible virus. COVID pandemic has altered
most of the parameters of life and besides playing havoc on health, has also made us insecure economically as well
as emotionally. To take advantage of the already fragile socio-economic conditions, unscrupulous players are

devising ever-changing modes of fraud. The cyberspace is crowded with traps laid by fraudsters. COVID pandemic

has heightened the vulnerability of common people more than ever before.
The pandemic, a black swan, has however, pushed the stock market to a new height. It is true that stock market
follows its own logic, not always commensurate with economic justification. During the pandemic period, a large

number of new investors have gone on stock market route, gearing the market further up. We must remember that
history of market crash

repeats itself every decade, despite having many a built-in regulatory system in place.

Still fresh in our collective memory are the corporate scams which shattered the market confidence in the last
couple of decades. Surprisingly, most of those corporate entities had considerably high credit ratings, if not the

highest, immediately before their collapse. Take for instance the case of Satyam, a decade back, or the recent IL&FS
with top notch ratings just before the debacle. Even the nationalised banks do not enjoy the same degree of

investor-confidence as it used to do couple of years back. Mounting NPAs have become an organic part of the our
banking system. PNB fiasco may be a tip of the iceberg. One may ask, where were the regulators? Were the credit

rating agencies in slumber! Couldn’t they warn the investors before? Question remains about the credibility of the
credit rating agencies on which banks the market confidence to a large extent. They still enjoy the privilege of

marketing ‘opinion’ and are therefore immune from any disciplinary action against any lapse on their part. There is
no denying that ‘rating the raters’ is always a fuzzy subject. It is high time that the market regulators, particularly

SEBI, be strictly vigilant on the mode of functioning of the rating agencies so as to ensure that no unholy
nexus between the raters and corporates or banks takes place, nor does the practice of ‘rating shopping’ pollute the
essence of this vital financial service.

The post-COVID economy is too weak to withstand any further shock. Rating agencies have a huge role to play in
this troubled time. The sanctity of the capital market and health of the economy rests on the honesty and integrity

of credit rating agencies. They must re-orient themselves as whistle blowers and rise up to justify their ethical
responsibilities.

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