3 weeks ago
SEBI opens new business avenues for credit rating agencies
Imagine a referee who makes sure companies that lend and borrow money play fair.
In India, that referee is called SEBI.
Credit rating agencies are like report-card makers for companies and governments that borrow money, giving them grades that show how safe it is to lend to them.
SEBI has now said these agencies can also grade other kinds of financial products that are watched by different referees.
To keep things clear, SEBI made new rules for these new grades.
Agencies must use separate email addresses and special pages on their websites for these products.
They also must say which referee is in charge of each product.
And they must tell people that SEBI's special safety rules do not apply to those products.
SEBI also added a new type of grade for city government bonds that shows how likely the money will be paid back.
These changes are meant to make the system fairer, clearer, and easier to understand for everyone.
SEBI has permitted credit rating agencies (CRAs) to rate financial instruments that fall under the purview of regulators other than SEBI.
Ring-fencing measures require CRAs to maintain separate email IDs and dedicated website sections for grievances and disclosures related to non-SEBI regulated instruments.
Rating reports and marketing materials must clearly identify the applicable regulator and state that SEBI's investor protection framework does not apply to those products.
SEBI extended Expected Loss (EL) ratings to municipal bonds, reflecting recovery prospects alongside the probability-of-default rating scale.
The changes are part of SEBI's 2025-26 policy initiatives to strengthen the credit rating ecosystem by improving ease of doing business and enhancing disclosure standards.
- Who
- SEBI (Securities and Exchange Board of India) and credit rating agencies (CRAs)
- What
- SEBI allowed CRAs to rate financial instruments regulated by other authorities, extended Expected Loss ratings to municipal bonds, and introduced changes for ESG Rating Providers
- Where
- India
- When
- As part of SEBI's policy initiatives during 2025-26, reported in its annual report
- Why
- To strengthen the credit rating ecosystem by improving ease of doing business, refining rating methodologies, and enhancing transparency and disclosure standards
Key facts
- Regulator
- Securities and Exchange Board of India (SEBI)
- Key change
- CRAs permitted to rate financial instruments regulated by authorities other than SEBI
- Ring-fencing measures
- Separate email IDs and dedicated website sections for non-SEBI regulated instruments
- Investor protection
- SEBI's investor protection framework does not apply to non-SEBI regulated products
- Net worth requirement
- CRAs must independently meet minimum net worth requirements under SEBI regulations
- Municipal bonds
- Expected Loss (EL) ratings extended to project-based municipal bond issuances
- ESG Rating Providers
- Subscriber-pays ERPs may share rating reports simultaneously with subscribers and issuers
- Timeframe
- Part of SEBI's policy initiatives during 2025-26
Sources
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