IL&FS crisis: What is the Sebi's latest diktat to credit rating agencies?

The IL&FS crisis exposed the chinks in the credit rating agencies' armour, catching the market off-guard. Market regulator Sebi's latest guidelines try to plug some of the loopholes

What exactly do credit rating agencies (CRAs) do?

A rating agency’s job is to monitor and analyse the relevant factors that affect the creditworthiness of an issuer — in other words, a borrower. Based on a number of underlying factors, such as business profile, macroeconomic and regulatory factors, the agency assigns a rating to the security or an instrument. The rating helps in pricing the security issued by a company. Higher the rating, lower is the coupon and vice versa. Typically, a rating is denoted in an alphanumeric symbol such as AA+ or A-. Every rating conveys the ability of the