RBI Asks Rating Agencies to Reveal Names of Non-cooperative companies

The Reserve Bank of India (RBI) has mandated credit rating agencies (CRAs) to reveal the names of companies that with hold essential information needed to assess their creditworthiness. This directive comes as nearly half of the 40,000 rated companies in India fail to cooperate with the Rating Agencies. When companies refuse to provide financials and relevant data, Rating Agencies either rely on publicly available information or withdraw their ratings. Non-cooperative companies receive an “issuer not cooperating” (INC) rating, indicated by a suffix attached to the credit rating symbol. Rating Agencies prefer to withdraw ratings entirely, but banks often hesitate due to their associations with the borrowers. Unlisted companies may choose to withhold information to hide their true financial position or mask underlying issues that could lead to rating downgrades. The RBI’s potential increase in risk weight on unrated securities or loans could prompt banks to allow Rating Agencies to withdraw ratings for uncooperative borrowers. This move aims to encourage cooperation and transparency among companies and improve the assessment of creditworthiness.