The Securities and Exchange Board of India (SEBI) issued a notification on April 22, 2025, announcing the Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2025. These regulations, effective upon their publication in the Official Gazette, further amend the 1999 regulations concerning credit rating agencies. The amendments include substituting a reference in the definition of “group company,” defining “subscriber-pays business model” for ESG rating providers, and clarifying the scope of ESG rating activities under other financial sector regulators.
The notification also introduces specific obligations for ESG rating providers following a subscriber-pays model. These providers must ensure their ratings are based solely on public information and that the fee charged to a subscriber who is also the rated entity (or its group/associate) is the lowest among all subscribers. Furthermore, only group companies or associates regulated by financial sector regulators, whose core business requires such ESG ratings, can subscribe, provided there is no conflict of interest.
Additionally, the amended regulations mandate that ESG rating providers under the subscriber-pays model share the rating report simultaneously with subscribers and the rated entity, allowing two working days for comments. Any comments received must be included in an addendum to the report. The policy on sharing reports and a facility for the rated entity to seek clarifications on methodology or assumptions must also be disclosed on the provider’s website.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 22nd April 2025
SECURITIES AND EXCHANGE BOARD OF INDIA (CREDIT RATING AGENCIES) (SECOND AMENDMENT) REGULATIONS, 2025
No. SEBI/LAD-NRO/GN/2025/242.—In exercise of the powers conferred under section 30 read with sections 11 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999, namely: –
1. These regulations may be called the Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2025.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999, ─
(1) in regulation 2, in sub-regulation (1), in clause (m), the words “Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969)” shall be substituted with the words “Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018”;
(2) in regulation 28B, in sub-regulation (1),
a. in clause (e), the word “and” shall be omitted;
b. in clause (f), the symbol “.” shall be substituted with the symbol “;”; and
c. after clause (f), the following clause shall be inserted, namely, –
“(g) “subscriber-pays business model” means a business model where the ESG rating provider derives its revenues from ESG ratings from subscribers including banks, insurance companies, pension funds, or the rated entity itself.”;
(3) in regulation 28H, in clause (g),
a. the symbol “.” shall be substituted with the symbol “:”;
b. the following proviso shall be inserted, namely, –
“Provided that nothing contained in these regulations shall preclude an ESG rating provider from carrying out ESG rating of products or issuers under the respective guidelines of a financial sector regulator or any authority as may be specified by the Board.
Explanation. ─ For the purposes of this clause, –
a. the ESG ratings undertaken by an ESG Rating Provider under the respective guidelines of a financial sector regulator or authority shall be under the purview of the respective financial sector regulator or authority;
b. an entity that does not propose to undertake ESG rating of products or issuers regulated by the Board may not be required to seek registration with the Board.”;
(4) in regulation 28K,
(a) in clause (q), the word “and” shall be omitted;
(b) in clause (r), the symbol “.” shall be substituted with the word and symbol “; and”; and
(c) after clause (r), the following clause shall be inserted, namely, –
“(s) state on its website the financial sector regulator or authority under whose purview it undertakes ESG ratings for each product or issuer and shall comply with the applicable laws administered by such financial sector regulator or authority.”;
(5) after regulation 28K, the following regulation shall be inserted, namely, –
“28KA. An ESG rating provider following a subscriber-pays business model shall ensure that:
a. the ESG rating assigned is based only on publicly available information;
b. The fee paid by the subscriber is the lowest fee payable or paid amongst all the subscribers, if:
i. the rated entity or issuer is a subscriber itself; or
ii. the group company or associate of an entity is a subscriber to the ESG rating of such entity or the securities issued by such entity;
(c) only group companies or associates, of an entity, whose core business requires ESG ratings of such entity or the securities issued by such entity, and are regulated by financial sector regulator(s) may subscribe to the ESG rating:
Provided that by such subscription, there shall be no conflict of interest or any potential or actual abuse or misuse.
Explanation.─ For the purpose of this regulation, “associate” shall have the same meaning as defined under the Companies Act, 2013 (18 of 2013).”;
(6) in regulation 28L, in sub-regulation (1), in clause (j), after the proviso, the following second proviso shall be inserted, namely, –
“Provided further that an ESG rating provider following a subscriber-pays business model shall:
i. share the ESG rating report with its subscribers and the rated entity or the issuer whose securities have been rated at the same time and provide two working days to such rated entity or the issuer to provide its comments;
ii, all comments or clarifications received from the rated entity within the specified timeline shall be included in the addendum to the ESG rating report by the ESG rating provider and if the rated entity or the issuer has a different viewpoint on the data or assumptions stated in the ESG rating report, the ESG rating provider, after taking into account the said viewpoint, shall either revise the ESG rating report or issue an addendum to the ESG rating report with its remarks, for circulation to all its subscribers, as considered appropriate by the ESG rating provider;
iii. disclose the policy regarding sharing of ESG rating report with the rated entity or the issuer whose securities have been rated and the subscribers on its website; and
iv. provide a facility to the rated entity or the issuer whose securities have been rated to seek any clarification, including the ESG rating methodology or assumptions.”.
BABITHA RAYUDU, Exe. Director
[ADVT.-III/4/Exty./42/2025-26]
Footnotes:
1. The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 were issued under S.O. No. 547 (E) dated July 7, 1999 published in the Gazette of India.
2. The Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 were subsequently amended on—
a. March 28, 2000 by the Securities and Exchange Board of India (Appeal to Securities Appellate Tribunal) (Amendment) Regulations, 2000 published in Official Gazette vide S.O. No. 278(E).
b. May 29, 2001, by the Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) (Regulations), 2001 vide S.O. No. 476 (E).
c. September 27, 2002 by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide No. S.O. No.1045 (E).
d. February 19, 2003 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2003 vide S.O. No. 203 (E).
e. October 1, 2003 by the Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2003 vide S.O. No. 1160 (E).
f. March 10, 2004 by Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S. O. No. 398 (E).
g. September 7, 2006 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2006 vide S. O. No. 1454(E).
h. May 26, 2008 by the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 vide no. LAD/ NRO/GN/2008/11/126538.
i March 19, 2010 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2009-2010/30/199044.
j. April 13, 2011 by the Securities and Exchange Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2011 vide Notification No. LAD/ NRO/ GN/ 201112/03/12650.
k. July 5, 2011 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2011 vide Notification No. LAD/NRO/GN/2011-12/10/21232.
l. December 27, 2011 by the Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2011 vide Notification No. LAD/NRO/GN/2011-12/31/39022.
m. May 23, 2014 by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2014 vide notification no. LAD-NRO/GN/2014-15/03/1089.
n. December 8, 2016 by the Securities and Exchange Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016 vide Notification No. SEBI/LAD/NRO/GN/2016-17/023.
o. March 6, 2017 by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 vide notification no. SEBI/LAD/NRO/GN/2016-17/037 read with notification no. SEBI/LAD/NRO/GN/2016-17/38 dated March 29, 2017.dated March 29, 2017.
p. May 30, 2018 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2018 vide Notification No. SEBI/LAD-NRO/GN/2018-15.
q. September 11, 2018 by the Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2018 vide Notification Notification No. SEBI/LAD-NRO/GN/2018/36.
r. September 23, 2019 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2019 vide Notification Notification No. SEBI/LAD-NRO/GN/2019/34.
s. April 17, 2020 by the by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide Notification No. SEBI/LAD-NRO/GN/2020/10.
t. May 5, 2021 by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2021 vide Notification No. SEBI/LAD-NRO/GN/2021/23.
u. August 3, 2021 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/29.
v. August 3, 2021 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021, vide No. SEBI/LAD-NRO/GN/2021/30.
w. January 24, 2022 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2022, vide No. SEBI/LAD-NRO/GN/2022/69.
x. January 17, 2023 by the Securities and Exchange Board of India (Change in Control in Intermediaries) (Amendment) Regulations, 2023, vide No. SEBI/LAD-NRO/GN/2023/115.
y. July 3, 2023 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2023, vide No. SEBI/LAD-NRO/GN/2023/136.
z. July 4, 2023 by the Securities and Exchange Board of India (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 vide No. SEBI/LAD–NRO/GN/2023/137.
za. July 8, 2024 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2024, vide No. SEBI/LAD-NRO/GN/2024/191.
zb. November 28, 2024 by the Securities and Exchange Board of India (Attestation of Documents) (Amendment) Regulations, 2024, vide No. SEBI/LAD-NRO/GN/2024/212.
zc. March 21, 2025 by the Securities and Exchange Board of India (Credit Rating Agencies) (Amendment) Regulations, 2025 vide No. SEBI/LAD-NRO/GN/2025/236.
