Agencies Allegedly Doctored Ratings For IL&FS And Even Allowed Former Directors To ‘Prepare’ Favourable Ratings

Professional judgements of credit rating agencies were allegedly compromised while they assessed IL&FS group companies, according to recent findings of audit firm Grant Thornton India.

The development has come immediately after CARE Ratings and ICRA sent their managing directors on leave after anonymous complaints were received by the Securities & Exchange Board of India which regulates credit rating agencies along with the Reserve Bank of India (RBI).

Earlier, the new government-appointed board of IL&FS had submitted a forensic report prepared by Grant Thornton to the Ministry of Corporate Affairs.

A Serious Fraud Investigation Office (SFIO) charge sheet had also mentioned about certain email exchanges between accused IFIN directors where they had allegedly discussed ways of getting favourable ratings.

The audit firm report has cited specific cases where ratings were changed after a review and meetings with the company. Instances were also found where ratings were even allegedly ‘prepared’ by erstwhile directors of IL&FS.

According to the report, there were instances where high ratings were eventually cleared despite concerns within agencies if such ratings were really justified.

Incidentally, four credit rating companies namely ICRA, CARE, India Ratings and Brickwork Ratings, were involved in rating various instruments issued by IFIN during 2013-2018.

Based on such faked ratings and audit reports, more than Rs 20,000 crore was invested by provident funds, mutual funds and insurance funds in such dodgy financial instruments issued by IL&FS and its various units like IFIN.