Markets regulator SEBI has imposed a 10% cap on cross-shareholding in credit rating agencies, raised their net worth requirement to Rs. 25 crore from Rs. 5 crore and disallowed an agency from having a seat on a rival’s board.

The new norms are likely to have an impact on global rating agencies like S&P, Moody’s and Fitch which have significant holdings in domestic agencies besides their direct presence.

SEBI has issued new rules under which a credit rating agency (CRA) will not, directly or indirectly, have more than 10% of shareholding or voting rights in another CRA and would not have representation on the board of the other CRA.

‘Permission needed’

Further, SEBI’s prior approval would be needed for acquisition of shares or voting rights in a CRA that results in change in control.

A shareholder with 10% stake or voting rights in a CRA will not hold similar holding or voting rights in any other CRA. This restriction will not apply to holdings by Pension Funds, Insurance schemes and Mutual Fund schemes.

The Securities and Exchange Board of India (SEBI) has given three years to existing CRAs to comply with the net worth requirement.