CARE Ratings international JV to start operations soon

Last Updated: Thu, Dec 06, 2012 12:10 hrs

Chennai, Dec 6 (IANS) India's Credit Analysis & Research Ltd (CARE Ratings) will soon start operations in a joint venture with headquarters in Portugal.

"Our joint venture - ARC Ratings - is expected to offer the third alternative to the two major global rating agencies Standard and Poor's or Moody's or their associates in various markets," T.N. Arun Kumar, chief general manager, told reporters here Thursday.

CARE Ratings has signed a non-biding memorandum of understanding (MOU) with four rating agencies each located in Brazil, Portugal, Malaysia and South Africa.

"All the five rating agencies will have 20 percent stake in ARC Ratings," Kumar said.

According to CARE Ratings, the international credit rating joint venture would operate as an independent and supra-sovereign rating agency and provide international scale ratings to assist local issues in mobilizing resources form international financial markets.

The company is focused on expanding its rating business in other countries, including Nepal and Mauritius through joint ventures.

CARE Ratings has already entered Maldives market and completed two assignments there and plan to rate Rufiyaa denominated debt of Maldivian companies and Maldivian subsidiaries of multinational companies, says the company's red herring prospectus.

Kumar does not expect any major fall in the company's revenues if the banks migrate to internal rating based approach for credit risks with Reserve Bank of India's (RBI) permission.

The RBI has advised banks to apply for migration to an internal rating based approach for measuring credit risk in determining the capital requirement for a given credit exposure from this April onwards.

Kumar said RBI will give banks its nod after 18 month detailed analysis of the applicant bank.

According to him, CARE Ratings does not expect all the banks to go in for internal rating based approach.

"Ratings of private placement of bonds will be there and hence we do not see our business going down," he said.

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