New Delhi, Feb 13 (IANS): A parliamentary committee on Wednesday recommended an inquiry into the role played by Life Insurance Corporation of India (LIC) and credit rating agencies (CRAs) in landing Infrastructure Leasing and Financial Services Limited (IL&FS) into a debt trap.

An investigation into the role played by LIC in the IL&FS mess becomes imminent as it is the largest shareholder in the conglomerate. The role of CRAs has come under the scanner as they failed to adequately vet IL&FS financials that led them to over-rate IL&FS entities just before signs of stress started appearing.

Calling for urgent measures to revive IL&FS while noting that it is the "only major institution funding the infrastructure projects in the country" the Parliamentary Standing Committee on Finance said the governance failures and indecision on the part of the IL&FS Board should also be thoroughly probed.

In its recommendations, the panel suggested the implementation of mandatory rotation of CRAs to "bring more accountability among the credit rating agencies as they will be wary of committing negligence".

"In order to have more vibrant functioning of domestic capital and money markets and enhancing credibility in the credit rating industry, we feel the mandatory rotation of CRAs may be implemented," the report stated.

The recommendation comes as the panel in the report highlighted that the credibility of credit rating action has "come into sharp question" in the crisis involving IL&FS.

As 'rating' of an instrument or entity is being increasingly relied upon by capital markets, bankers and investors and, since it constitutes a key input for financial decision-making of far-reaching magnitude, the committee stressed the need for the rating process to be "absolutely professional".