Mumbai: Amid deafening celebrations and chest thumping by BJP and its ministers in the union government after Moody's upgraded India's rating Friday come reports that the global rating agency was fined for "rating fraud".
As reported by The National Herald, Moody’s has been fined in the US, in Europe and in Hong Kong for ‘rating fraud’, and all during the last year and a half.
The reports also says that regulators in the United States, Europe and in Hong Kong questioned the integrity of the process and imposed heavy fines on the agency.
In January 2017 Moody’s agreed to pay a fine of 864 million US Dollars ( approximately 550 Crore INR) to escape criminal action for its inflated rating of banks and securities in the run up to the sub-prime crisis of 2008, the reports says.
Likewise, in June 2017 Europe’s markets watchdog imposed a penalty of 1.24 million Euros on Moody’s for “not adhering to the correct rating protocol".
Similarly, in April, 2016 a Hong Kong tribunal upheld a penalty of 1.4 million HK Dollars on Moody’s Financial Service for similar reasons, the report says.
“Moody’s failed to adhere to its own credit-rating standards and fell short on its pledge of transparency in the run-up to the ‘great recession’", the report says citing US Justice Department.
Moody’s, it had said, was fined for issuing false credit ratings that eventually led to the market crash. A probe found that Moody’s issued high ratings to sub-prime home loans, which later collapsed in 2007. Credit ratings firms gave out top grades to junk deals, in order to secure business from the banks.
Moody's was also criticised by Turkish President Tayyip Erdogan after the rating agency’s decision to downgrade the countrie’s credit rating to “junk” status.
Erdogan said Moody's decision was politically motivated and therefore should not be taken seriously.
In a statement released Friday, Moody's upgraded India's sovereign credit rating by a notch to 'Baa2' after a period of 13 years and for the first time since 2004, with a stable outlook citing "improved growth prospects driven by economic and institutional reforms".
Moody's had last upgraded India's rating to 'Baa3' in 2004. In 2015, the rating outlook was changed to 'positive' from 'stable'.
There were wild celebrations soon after Moody's statement with BJP president and union ministers taking to Twitter to take credit of what they called as "Modi government's hard work behind the unexpected move".
"India’s largest ever increase in Ease of Doing Business rankings, Pew study ascertaining PM @narendramodi ji’s popularity, Moody’s upgrade are all reflections of Modi Govt’s hard-work and reform process", BJP president Amit Shah said in a message posted on Twitter.
Union Railways Minister Piyush Goyal in his reaction said," Recognising India's growth enhancing reforms under PM @narendramodi, Moody’s has upgraded India’s sovereign rating for the first time since 2004. Entire world is recognising "Sabka Saath, Sabka Vikas".
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