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Rupees 1 Crore penalty on ICRA and CARE by SEBI - not very much effective

 Based upon today's news, SEBI has imposed penalty of INR 1 Crore each on ICRA and CARE for their procrastinating and lethargic approach on assigning good rating to IL&FS in spite of poor financial results. The forensic Audit had ripped off the financial results of IL&FS in 2018-19. It was revealed that rating agencies did not perform at their best and such ratings misled the investors badly. 


https://economictimes.indiatimes.com/markets/stocks/news/ilfs-case-sebi-raises-penalty-to-rs-1-cr-each-on-icra-care/articleshow/78259291.cms#:~:text=New%20Delhi%3A%20Markets%20regulator%20Sebi,non%2Dconvertible%20debentures%20of%20IL%26FS.


So far, SEBI imposes penalty of INR 1 Crores only. It did the same on RCom also. Now rating agencies will increase their fees by INR 1 crores and again assign the same rating to all the poor performing company. The penalty should be like that the company will always keep in mind the poor performance. Assigning incorrect rating on account of gross negligence lead to misrepresentation. The work papers of rating agencies must be examined by some reputed audit firm and it should be publicly disclosed. The act of rating agencies have eroded the confidence of investors across the country. The only problem is, ICRA and CARE will go for legal battle and it will pay more money to lawyers and justice will be delayed. Suspension of one agency at least for an year may do some thing good.  



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