India Ratings receives fees from borrowers for obtaining ratings for their bank loans and credit facilities. India Ratings receives initial rating fee for assigning the rating. In addition, annual surveillance fee is charged for monitoring the rating over the life of the rated instrument.
The general nature of compensation arrangements for unrated entities for bank loan ratings is given below.
- Initial Rating fee: 0.04% of the rated bank facilities (subject to minimum of Rs 50,000/-)
- Annual surveillance fee: 0.025% of the rated bank facilities (subject to minimum of Rs 50,000/-)
The out of pocket expenses incurred in connection with the rating and surveillance activities are charged at actuals. The service tax is payable on the above at the rates applicable from time to time.
The fees also depend on variety of factors including the industry type and complexity of the rating. India Ratings may consider different pricing arrangement for frequent and large volume borrowers and such other entities. India Ratings reserves right to alter the above fee schedule for bulk deals, bidding for tenders, etc.
There is no linkage between rating fee and rating outcome. There is separation of functions at India Ratings between the Business Relationship Management team and the analytical team. The Business Relationship Management team negotiates the commercial terms of the assignment. The analytical team conducts credit analysis and provides credit opinions.
This disclosure is made as required under Reserve Bank of India's circular no. DBOD.BP.No./5385/21.06.007/2012-13 dated April 26, 2013 requiring accredited Credit Rating Agencies to disclose on their websites the nature of compensation arrangements they have with the rated entities for bank loan ratings.