New Delhi, July 4 (KNN) India’s largest Credit rating agency Crisil has purchased 8.90 per cent stake in CARE Ratings Ltd to become the 2^nd largest shareholder of CARE.

The development appears to be significant as buying of shares of a competitor that also above the market rate is quite unusual in the financial sector.

While Crisil in a statement has said that the investment in the equity of CARE has no special rights and is in compliance with applicable rules and regulations, the buzz in the market is that a creeping acquisition has started.

The biggest concern of the MSMEs of the development is any consolidation in the rating agency will start a monopolistic pricing.

MSMEs are already wary of the faulty bank loan rating approach of the rating agencies and the leading federation, FISME, has already approached RBI to do away with the third party rating of MSME loans and to replace it by in house rating by the bank concerned.

At this juncture possible acquisition of CARE by Crisil will make the life further difficult for MSMEs by hiking the rating fees.

Crisil said the investment has been made pursuant to a bid process conducted by Canara Bank. The public sector bank divested over 26.22 lakh equity shares in CARE at ₹1,660 apiece on Thursday. for ₹435.32 crore.

While Crisil, the largest rating agency in Indian market is controlled by global leader Standard and Poor, CARE’s ownership is with Government Bank and financial institutions with LIC holding the largest single stake of little above 9%.

With these structure, it will be easier for Crisil to takeover CARE, when the Government financial institutions are eager to exit from their ‘non – core’ business to improve the balance sheet.

However, controlling of two large rating agencies by one multinational, may not spell good for the Indian financial market, at least for the MSMEs.

It may be the high time for the RBI to review the working of the rating agencies, particularly their competency to rate MSME bank loans. (KNN/ DB)