The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs 10 million on CARE Ratings in connection with lapses in assigning credit rating to non-convertible debentures (NCD) of Reliance Communications (RCOM).

The case relates to RCOM default on the repayment of principal amount of Rs 3,750 million and interest of Rs 97 million due in February 2017 and March 2017, respectively.

According to SEBI,CARE Ratings had failed to monitor the factors affecting the creditworthiness of RCOM in a timely manner, resulting in significant delay in conducting the rating process and downgrading the rating. In May 2017, CARE Ratings downgraded the ratings assigned to NCDs issued by RCOM to default.

Further, the regulator alleged that the rating agency had failed to initiate a review of its earlier ratings assigned to RCOM even after the publication of third quarter results in financial year 2017 (FY17). The results showed a major decline in cash accruals affecting its credit profile affecting its credit profile.

In addition, CARE Ratings had failed to take steps as prescribed under the norms, when it had not received no-default statement (NDS) for the quarter ended (QE) December 31, 2017, from RCOM. In addition, SEBI said the agency did not take into consideration the ratings downgrade of RCOM’S debt securities by Fitch and Moody’s for conducting a review of its own ratings.

Accordingly, the regulator imposed a penalty on CARE Ratings.