Moody’s India unit CEO put on leave amid probe

Bloomberg

Moody’s Investors Service’s India unit has put its chief on leave amid a probe into a controversial rating decision, in the latest sign of trouble in the nation’s credit evaluation industry.
ICRA Ltd’s board has decided to place Chief Executive Officer Naresh Takkar on leave, the company said in an exchange filing. The rater is examining concerns raised in a whistle-blower complaint, sent to it by the regulator, that its executives interfered to guarantee top ratings for a financier that plunged to default just two months later.
The rating company was probing certain matters related to a debt score it assigned to a client and its subsidiaries, ICRA said, without naming the client. ET Now television channel had reported that the complaint says the executives meddled to ensure systemically important Infrastructure Leasing & Financial Services Ltd would receive a AAA rating, citing people it didn’t identify.
The board’s decision comes at a time when financial regulator Securities and Exchange Board of India is tightening rules for rating companies.
Those firms have come under fire for missing warning signs like the infrastructure financier’s soaring debt load, which jumped 44 percent between 2015 and 2018. The default of IL&FS sent shock waves across the country’s credit markets, triggering a liquidity crisis that is still reverberating among the shadow lenders.
“The current credit market turbulence is eroding the
market’s confidence on credit rating companies,” said Hemant Dharnidharka, chief executive officer at Dharni Wealth, a
firm that provides financial advisory services to high net-worth individuals.
“There have been cases where there has been no warning or action by rating companies and the borrower has defaulted on debt repayments.”