PR No. 150/2016

Circular on Enhanced Standards for Credit Rating Agencies (CRAs)

With a view to strengthen the functioning of CRAs and to harmonise the best practices in the industry,SEBI constituted a committee on “Strengthening the Guidelines and Raising Industry Standards for Credit Rating Agencies (CRAs)”, which included representatives from all the CRAs. The objective of the Committee was to deliberate upon measures and guidelines to bring about greater transparency in the policies of the CRAs, enhance the standards followed by the industry and, thereby, facilitate ease of understanding of the ratings by the investors.

With a view to implementing the recommendations of the said Committee, SEBI has issued circular No. SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dated November 1, 2016 on Enhanced Standards for Credit Rating Agencies (CRAs)

The circular covers the following broad areas:

I. Policy in respect of non-co-operation by the issuer

  • CRAs to mandatorily review the instrument, on an ongoing basis throughout the instrument’s lifetime, on the basis of best available information, even in case of non-cooperation by the issuer.
  • Standardization of Press Release in case of non-co-operation
  • Credit rating symbol to be accompanied by “Issuer did not co-operate; Based on best available information” in the same font size

II. Accountability and managing conflict of interest

  • Obligations, responsibilities, managing conflict of interest, eligibility, composition, system of voting etc. of rating committee members of Rating Committees, and roles, responsibilities and desired timelines for analysts to be set out by each CRA in its Operational Manual.
  • Persons having business responsibility not to be part of the Rating Committee. However, the MD/ CEO may be a member of the Rating Committee if the majority of the Rating Committee members are independent.
  • Annual review of the functioning of the Rating Committee.

III. Standardization of format of Press Release– Press Release to include Rating action and Outlook, details of the instrument, key rating drivers, rating history, reference to applicable criteria, contact details of Rating Analyst etc.

IV. Disclosures on website of CRA of :

  • Criteria used for rating various instruments and sectors and for default recognition
  • Rating Process and Policies
  • Any change in Rating Criteria, process and policies
  • All Rating history, Press Releases and Rating Reports assigned by the CRA including ratings withdrawn and those non- accepted by the issuer, even in case of non-public issues.
  • Rating transition/ Rating history of the issuer
  • Details of all such ratings where the review became due but was not completed by the due date by the CRA

The circular is available on the website:

November 01, 2016



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