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India's SEBI tightens shareholding norms for rating agencies, mutual funds

[MUMBAI] India's market regulator unveiled a number of measures on Thursday to boost governance and resolve issues around conflicts of interest for credit rating agencies (CRAs) and asset management companies (AMCs).

No CRA will be allowed to hold a stake of more than 10 per cent, directly or indirectly, in any other CRA or have a position on the board, the Securities and Exchange Board of India said. Shareholders with a stake of 10 per cent or more in a CRA will not be permitted to hold 10 per cent or more of the shares in any other CRA, except for pension funds, insurance schemes and mutual fund schemes, the regulator said.

The regulator similarly curbed cross-holdings in asset management companies on Thursday after the conclusion of its quarterly board meeting.

SEBI raised the minimum net worth requirement of a CRA to 250 million rupees(S$5.2 million) from 50 million rupees.

The regulator has been tightening norms for credit rating agencies, including increasing disclosure requirements, in a bid to boost transparency and accountability.

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SEBI also relaxed conditions for foreign portfolio investors to enter Indian markets as part of efforts to curb the use of participatory notes - products created by banks to track Indian shares, debt and derivatives.

A government-appointed panel warned in 2015 that P-notes could lead to "misuse", including money laundering or the channelling into domestic markets of unaccounted wealth held by Indians abroad.


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