The move of the RBI to monitor and evaluate the functioning and work of rating agencies is most welcome.Rating agencies have a tendency to give excellent ratings to new issues,new products,new derivatives etc of powerful corporates to enhance their earnings and expand their business.In the U.S rating agencies have caused untold damage to the economy by giving good rating to all sorts of innovative products and derivatives based on which banks in US made investments in derivatives backed by all sorts of loans including sub-prime loans..Such thing should not be replicated in Indian economy.RBI has taken this initiative in order to prevent U.S type of ratings that may misguide and prompt all banks to invest in all sorts of derivatives.This is an excelent preventive measure.Indian banks are stronger and more resilient than those in other countries because of the reforms implemented here.Banks must continue to be strong and healthy and their investments must be healthy too.From this angle the RBI initiative is most welcome.
It is better if the RBI and SEBI take steps to establish a separate regulator for rating agencies in India.
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