MUMBAI, May 16: The spotlight is now on the credit-rating agencies. The CRB episode has brought into focus the "competence" and even the integrity of Indian rating agencies.

If the sources are to be believed, the rating firm Care agreed to give CRB Caps the `desired rating' for its fixed-deposit programme when other two rating agencies Crisil and Icra had given a lower rating which the finance company declined to accept. Companies have the option of walking out if the grade of rating is not "acceptable" to them.

CARE put the fixed-deposit programme of CRB Capital Markets under credit-watch with negative implications after RBI barred the firm from accepting fresh deposits in April.

According to RBI officials, the decision was taken when it was detected that there was a `volition of directions'.

CARE officials had earlier defended the rating saying that the financials of the company were strong enough. While non-compliance with RBI regulations should affect the rating of the company, it is not a sufficient reason to take any drastic measures, the officials said.

CARE managing director PM Thomas was not available for comment on Friday.Industry sources point out that the `careless' ratings by rating agencies is a fallout of intense competition among the three rating agencies. While Crisil dominates the scene with about 60 per cent market shares, Icra comes second with over 25 per cent share and CARE comes third. The fourth agency, Duff & Phelps, is yet to carve out a niche for itself in the market.

While Crisil and Icra have identical rating scales for fixed deposits of finance companies, CARE has an additional slab, BBB, to accommodate those companies which were refused investment grade by the two agencies, industry sources said.

Both Crisil and Icra offer FAAA and MAAA as the highest rating for fixed deposits. The corresponding scale of CARE is CARE AAA. The cut-off slab for the investment grade offered by these two agencies are MA for Icra and FA However, for CARE the cut-off slab for investment grade is one notch below this level at BBB.

"We need to keep a continuous watch even after the rating is given. This is particularly needed for an instrument like FD which is illiquid and non-tradable. Investors cannot offload FDs unless they are due for redemption," a senior executive of a rating agency said.

Icra has downgraded about 45 instruments over the last one year. The number of outstanding instruments rated by Icra is pegged at 700. For Crisil, the downgrading exercise is even severe. Despite repeated attempts, none of the CARE executives could be contacted for comment.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.