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Editorial : Full disclosure: on the credit rating industry

Structural reforms are needed to bring accountability to the credit rating industry
After the IL&FS crisis(संकटकाल), the Securities and Exchange Board of India is now trying to increase(वृद्धि) the level of scrutiny on credit
rating agencies that failed to warn(चेतावनी दी) investors(निवेशकों) about it. SEBI has come out with new guidelines(दिशानिर्देशों ) to improve(सुधारना) the quality of disclosures(खुलासे/भंडाफोड़) made by credit rating agencies. According to the new norms, credit rating agencies will have to inform investors about the liquidity(चल निधि/तरलता) situation of the companies they rate through parameters such as their cash balance, liquidity coverage ratio(अनुपात), access to emergency credit lines, asset(संपत्ति)-liability(दायित्व mismatch, etc. Further, rating agencies will have to disclose their own historical(ऐतिहासिक) rating track record by informing clients about how often their rating of an entity(वास्तविकता/अस्तित्व) has changed over a period of time. SEBI has been working hard to improve transparency and credibility(विश्वसनीयता) among(बीच)rating agencies for some time now, including(समेत/सहित) through a circular(परिपत्र) issued(जारी किया) in November 2016 calling for enhanced(बढ़ाया/वर्धित) standards for rating agencies. But the latest disclosure norms seem to be a response to the IL&FS defaults and the ensuing(आगामी) crisis. While rating agencies already make at least some of these disclosures one way or the other, mandating(अनिवार्य) the formal disclosure of these facts is still welcome. The ready availability(उपलब्धता) of information can help investors make better decisions.
But the latest regulations can only help to a certain(कुछ) extent(हद तक/सीमा) as a lot of the problems with the credit rating industry have to do with structural(संरचनात्मक) issues rather than the lack(कमी/अभाव) of formal rules. The primary one is the flawed “issuer-pays” model where the entity that issues the instrument(साधन/उपकरण) also pays the ratings agency for its services. This often(अक्सर ) leads to a situation of conflict(संघर्ष/टकराव) of interest, with tremendous(जबरदस्त )potential(क्षमता) for rating biases. Second, the credit rating market in India has high barriers( बाधाएं) to entry, which prevent(रोकना/निवारण करना) competition that is vital(महत्वपूर्ण/जीवनप्रद) to protecting the interests of investors. This is not very different from the case in many developed economies where rating agencies enjoy the benefits of an oligopoly(अल्पाधिकार). Better disclosures can increase the amount of information available to investors, but without a sufficient number of alternative(विकल्प) credit rating providers(प्रदान करनेवाला), quality standards in ratings will not improve. It is thus no surprise that even after repeated ratings failures in their long history, credit rating agencies continue to remain and flourish(विकास) in business. Structural reform should aim to solve another severe problem plaguing the industry, which has to do with rating shopping and the loyalty of credit rating agencies in general. Rating agencies will have to come up withlucrative(लाभप्रद/निर्मूल्य) business models that put the interests of investors above those of borrowers(उधारकर्ताओं). Such a change requires a policy framework that allows easier entry and innovation(नवीनीकरण/नई पद्धति) in the credit rating industry.

Important Vocabulary
1.Crisis(संकटकाल),
Synonyms: catastrophe, change, confrontation, crunch, deadlock
Antonyms: agreement, benefit, blessing, breakthrough, calm
2.Disclosures(खुलासे/भंडाफोड़) 
Synonyms: acknowledgment, admission, confession, discovery, exposure
Antonyms: concealment, denial, secret
3.Asset(संपत्ति
Synonyms: aid, benefit, credit, resource, service
Antonyms: hindrance, hurt, injury, disadvantage, liability
4.Credibility(विश्वसनीयता
Synonyms: chance, integrity, prospect, reliability, soundness
Antonyms: unlikelihood, implausibility, improbability, unreasonableness
5.Availability(उपलब्धता)
Synonyms: opportunity, show, time, availability, connection
Antonyms: closing, closure, conclusion, ending, finish
6.Enhanced(बढ़ाया/वर्धित) 
Synonyms: add to, appreciate, augment, boost, build up
Antonyms: decrease, diminish, discourage, hurt, lessen
7. Certain(कुछ)
Synonyms: convinced, positive, sure, assertive, assured, believing
Antonyms: doubtful, indefinite, uncertain, unsure, doubting
8.Often(अक्सर
Synonyms: generally, much, regularly, repeatedly, usually
Antonyms: infrequently, rarely, seldom
9.Oligopoly(अल्पाधिकार)
Synonyms: cartel, holding, ownership, patent, trust
Antonyms: distribution, joint-ownership, scattering, sharing
10.Conflict(संघर्ष/टकराव)
Synonyms: battle, clash, combat, competition, rivalry
Antonyms: peace, truce, agreement, calm, harmony
11.Lucrative(लाभप्रद/निर्मूल्य)
Synonyms: advantageous, cost effective, fruitful, good, money-making, Antonyms: poorly paid, unprofitable
12.Borrowers(उधारकर्ताओं).
Synonyms: bum, panhandler, vagabond, asker, borrower
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