Care Ratings chief put on leave while India’s credit assessment industry is under scrutiny

Mumbai: Care Ratings Ltd. has put its chief on leave pending a probe into an anonymous complaint received by the nation’s markets regulator, adding to the troubles for India’s credit assessment industry.

Care’s board placed Chief Executive Officer Rajesh Mokashi on leave, the company said in an exchange filing Wednesday evening. Earlier this month, the local unit of Moody’s Investors Service sent its managing director on leave amid an inquiry into a controversial rating decision.

India’s credit rating companies have been facing criticism for missing warning signs at the IL&FS Group, whose surprise default last year led to a crippling liquidity crisis and soured the sentiment for the entire financial sector. The incident has since prompted the regulator Securities & Exchange Board of India to tighten rules for rating firms to restore investor faith in the system.

“Two rating firms sending their CEOs on leave shows the magnitude and scale of the recent developments,” said Amit Tandon, managing director at Institutional Investor Advisory Services. “Typically, the rating side is separated from business development. The probes need to address this and ask whether the Chinese walls were maintained.”

Care appointed Executive Director for Ratings T.N. Arun Kumar as interim chief executive officer. Kumar won’t be part of the rating operations to ensure the independence of the ratings process, according to the filing. The Mumbai-based company didn’t immediately reply to an email seeking comments on the probe.

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