Operational Circular for Credit Rating Agencies (Updated as on February 03, 2023)

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....ode of conduct applicable on CRAs. Multiple circulars have been issued, over the years, covering the operational and procedural aspects thereof. II. III. In order to enable the industry and other users to have access to all the applicable circulars/ directions at one place, Operational Circular for CRAS has been prepared. This Operational Circular is a compilation of the existing circulars as on February IV. இ भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 03, 2023, with consequent changes. The stipulations contained in these circulars have been detailed chapter-wise in this operational circular. Accordingly, the list of existing circulars for CRAS which have been superseded by Operational Circular is placed at Annexure A. This circular is issued in exercise of the powers conferred by Section 11 (1) of Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 20 of Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999, to protect the....

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.... Guidelines on the listed securities/instruments/products falling under the purview of other financial sector regulator/s or authority/ies'…….. Chapter III: REPORTING AND DISCLOSURES.... 25. Probability of Default Benchmark 26. Periodic Disclosures. 27. Continuous Disclosures, Reporting and Timelines. .40 .40 .40 42 .48 28. Periodical report to be submitted to SEBI.. .52 29. Other Continuous Disclosures .52 30. Guidelines on manner of disclosures by CRAS on its website .53 Chapter IV: INTERNAL AUDIT FOR CRAS.. 31. Internal Audit for CRAS ..... 32. Requirements related to Internal Audit of CRAS ......... Chapter V: Miscellaneous... 54 .54 SS .54 .58 33. Designated e-mail ID for regulatory communication with SEBI.. 34. Information regarding Grievance Redressal Mechanism ...…………... 35. Guidelines on Outsourcing of Activities by CRAS. .58 ..58 .59 36. General Guidelines for dealing with Conflicts of Interest of CRAS and their Associated Persons in Securities Market.... .59 37. Standardization of industry classification- Applicability to CRA……………………………....

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....nd Exchange Board of India 2.2.2. Whether any action has been initiated / taken under SCRA/SEBI Act or rules and regulations made thereunder? If yes, status thereof along with corrective action taken to avoid such violations in the future. The acquirer shall also confirm that it shall honour all past liabilities / obligations of the applicant, if any. 2.2.3. Whether any investor complaint is pending? If yes, steps taken and confirmation that the acquirer shall resolve the same. 2.2.4. Details of litigation, if any. 2.2.5. That all the fees due to SEBI have been paid. 2.2.6. That there will not be any change in the Board of Directors of incumbent, till the time prior approval is granted. 2.2.7. That the incumbent shall inform all its existing investors / clients in order to enable them to take informed decision regarding their continuance or otherwise with the entity with new management. 2.3. The prior approval granted by SEBI shall be valid for a period of 180 days from the date of communication. 3. Transfer of business by SEBI registered intermediaries to other legal entity 3.1. SEBI has been receiving registration applications pursuant to transfer of business (S....

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....te of the Order, or the date of submission of request for surrender of certificate of registration ("the Request") to SEBI, as applicable, the concerned CRA shall - 4.1.1.1. disclose prominently on its website, the Order or the Request, as the case may be, and communicate the same to its clients within 15 days of the Order or the Request; 4.1.1.2. not take any new clients or fresh mandates; 4.1.1.3. allow its clients to withdraw any assignment given to the CRA, without any additional cost to such clients; 4.1.1.4. facilitate an orderly migration of assignments as desired by clients to other CRA(s) holding a certificate of registration under SEBI (Credit Rating Agencies) Regulations, 1999 ('CRA Regulations'); Page 7 of 104 भारतीय प्रतिभूति और विनिमय बोर्ड GB Securities and Exchange Board of India 4.1.1.5. continue to comply with the provisions of the CRA Regulations and circulars thereunder, till the time the CRA holds the certificate of registration; 4.1.1.6. continue to co-operate with SEBI with regard to sharing of info....

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.... surrender the registration voluntarily, it shall transfer, wherever relevant, it's existing business/ client accounts to another SEBI registered intermediary, before they make request to SEBI for accepting the surrender of the certificate of registration. 4.5.2. The CRA may, if it so desires, make a representation for dispensing with the procedure, along with the application, for surrender in terms of the first proviso to Regulation 33B of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 in the prescribed format placed as Annexure 1. 4.5.3. In all cases of transfer of business or client accounts to another registered intermediary, the clients shall not be subjected to any additional cost. 4.6. In case of surrender of certificate of registration, the credit ratings assigned by the CRA whose certificate of registration is being surrendered, shall be valid till such time the client withdraws the assignment and/or migrates to another CRA, or the date of acceptance of surrender by SEBI, whichever is earlier. 4.7. In case of suspension of certificate of registration, the credit ratings assigned by the CRA, whose certificate of registration is susp....

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....और विनिमय बोर्ड Securities and Exchange Board of India Chapter II: Rating Operations 5. Rating Scale, Rating Symbols and Definitions 5.1. Standardization of Rating Symbols and Definitions 5.1.1. The Corporate Bonds and Securitization Advisory Committee of SEBI recommended that the rating symbols and their definitions should be standardized. 5.1.2. Pursuant to the above, in consultation with the CRAS and considering the international practices, standardized symbols and their definitions have been devised for the following: 5.1.2.1. Long term securities; 5.1.2.2. Short term securities; 5.1.2.3. Long term structured finance instruments; 5.1.2.4. Short term structured finance instruments; 5.1.2.5. Long term mutual fund schemes; and 5.1.2.6. Short term mutual fund schemes. 5.1.3. The symbols and definitions as given in Annexures 2-7 shall be used for the new ratings/ reviews by the CRAS. 5.1.4. for ratings of Capital Protection Oriented Schemes, as required under Regulation38A of SEBI (Mutual Fund) Regulations, 1996, CRAs shall use rating scales (i.e. symbols and their definitions) for structured fin....

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....pected Loss (EL) based Rating Scale may be used by CRAS for ratings of projects/ instruments associated with infrastructure sector to begin with¹: 1 Modified vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 Page 12 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Rating symbols should have CRA's first name as prefix Rating symbol EL 1 EL 2 EL 3 EL 4 EL 5 EL 6 EL 7 Definition Instruments rated "EL 1" are considered to have the lowest expected loss, over the life of the instrument Instruments rated "EL 2” are considered to have very low expected loss, over the life of the instrument Instruments rated "EL 3" are considered to have low expected loss, over the life of the instrument Instruments rated "EL 4” are considered to have moderate expected loss over the life of the instrument. Instruments rated "EL 5" are considered to have high expected loss, over the life of the instrument Instruments rated "EL 6" are considered to have very hig....

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..... At least, the following rating criteria shall be formulated by each CRA and should be reviewed periodically, criteria on: 7.5.1. Default recognition (Definition of default to be followed by all CRAS is provided in the Annexure 11) 7.5.2. Financial ratios (Explaining how a CRA analyses various financial ratios including adjustments made to financial statements for the interpretation of financial ratios) 7.5.3. Consolidation of companies 7.5.4. Parent support/group/government support- CRAS may review their rating criteria with regard to assessment of holding companies and subsidiaries in terms of their inter-linkages, holding company's liquidity, financial flexibility and support to the subsidiaries, etc. Page 14 of 104 இ भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 7.5.5. Manufacturing, trading companies, and services sector 7.5.6. Banks and financial institutions 7.5.7. Securitization transactions 7.5.8. Public finance 7.5.9. Infrastructure ratings 8. Rating Process 8.1. CRAS are mand....

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....S shall meet the audit committee of the rated entity, at least once in a year, to discuss issues including related party transactions, internal financial control and other material disclosures made by the management, which have a bearing on rating of the listed NCDs. 8.7. In order to achieve a consistent approach, CRAs, in consultation with SEBI, shall frame a uniform Standard Operating Procedure (SOP) in respect of tracking and timely recognition of default, which shall be disclosed on the website of each CRA. 8.8. The CRAs shall at all times observe high standards and fairness in conduct of the business and any act of omission or commission in contravention of the provisions of clauses 12 and/or 23 of Code of Conduct, as specified under Third Schedule of the SEBI (Credit Rating Agencies) Regulations, 1999, in letter or spirit, may result in violation of the provisions of section 12A of the Securities and Exchange Board of India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. Page 16 of 104 GB भारतीय प्रतिभूति à¤....

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....arlier estimates 9.2.1.7. Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals. 9.2.1.8. Disruption/ commencement/ postponement of operations of any unit or division of the listed entity. 9.2.1.9. Any attachment or prohibitory orders against the Issuer 9.2.1.10. Any rating action taken by an International Rating Agency with respect to rating assigned to the Issuer/ Instruments issued by the Issuer. 9.2.1.11. sharp deviations in bond spreads of securities vis-à-vis relevant benchmark yield. (CRAS shall devise a model to track deviations in bond spreads) 9.2.2. CRAS shall publish on their website press release regarding the rating action (including reiteration of existing rating), if warranted, immediately, but not later than 7 days of occurrence of the said event. 9.3. 'No Default Statement' to be sought from the Issuer on a monthly basis 9.3.1. In order to enable timely recognition of default by the CRA, the CRA shall seek a 'No Default Statement (NDS)' from the Issuer at the end of each month, which shall be provided to the CRA by the Issuer on the first working day of the next month. 9.3.2. The NDS shall require....

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....d out by the CRAs on a monthly basis. 10.1.5. Rating Watch: 'Rating watch' indicates a CRA's view on the expected direction of the rating movement in the short term. The CRA shall use Page 19 of 104 भारतीय प्रतिभूति और विनिमय बोर्ड GB Securities and Exchange Board of India following Standard descriptors to when an issuer / security is placed on "Rating Watch": 10.1.5.1. "Rating Watch with Positive Implications" 10.1.5.2. .“Rating Watch with Developing Implications" 10.1.5.3. “Rating Watch with Negative Implications" 10.1.6. Press Release related to review of rating shall also carry the rating transition/ history of all securities of that issuer, rated by the CRA in the past 3 years, irrespective of whether the security is currently outstanding or not. 10.1.7. While CRAS are required to monitor and analyse the relevant factors that affect the creditworthiness of an issuer and discuss the same in the rating notes considered by the rating committee for assignment of ratings, such relevant factors may also be suitab....

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....ful to the end users, it has been decided to mandate disclosure of liquidity indicators using standardized terminology. Accordingly, CRAS shall disclose the liquidity indictors using one of the following indicators and give an explanation thereon: 10.3.1. Superior / Strong 10.3.2. Adequate 10.3.3. Stretched 10.3.4. Poor An indicative description for these liquidity indicators is provided at Annexure 14. 10.4. Structured Finance Products: While publishing the ratings of structured finance products and their movements, a CRA apart from following all the applicable requirements in case of non-structured ratings shall also disclose the track record of the originator and details of nature of underlying assets while assigning the credit rating. The track record shall include a brief description of the financials of the originator, rating migrations to speculative categories and defaults. 11. Policy in respect of non-co-operation by the issuer 11.1. In case of non-cooperation by the issuer (such as not providing information required for rating, non-payment of fees for conducting surveillance), in line with the existing Page 21 of 104 இ भारतà....

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.... Securities and Exchange Board of India thereunder), etc. and disclose it on their website. 11.5. In case of non-cooperation by the issuer, the credit rating symbol shall be accompanied by the suffix "ISSUER NOT COOPERATING*”in the same font size. The suffix shall be explained below and shall read as 'Issuer did not cooperate; based on best available information'. 11.6. Information to be disclosed through Press Release: The rating action(s) in such cases shall be promptly disclosed through press release(s), which shall mention, at least, the following: 11.6.1. Date of Press Release 11.6.2. Details of security 11.6.3. Rating Action and Indicative/updated rating based on best available information 11.6.4. A brief write-up on the non-co-operation by the Issuer/ Borrower and the consistent follow-up done by the CRA for getting the information. 11.6.5. Hyperlink/ reference to the applicable "Criteria" 11.6.6. Limitations regarding information availability (shall have a suitable caveat cautioning the investors/lenders /public) 11.6.7. Rating History for last three years 11.6.8. Name and contact details of the Rating Analyst(s) 11.7. In case an issuer, having no....

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....rawal in case of Single Ratings outstanding on rated security: In terms of Regulation 16(3) of SEBI (Credit Rating Agencies) Regulations, 1999, a CRA may withdraw a rating, subject to the CRA having: 3 Inserted vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 4 Modified vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 * Para 11.8.3 deleted vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 Page 24 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 12.3.1. rated the security continuously for 5 years or 50 per cent of the tenure of the security, whichever is higher. 12.3.2. received an undertaking from the Issuer that a rating is available on that security. 12.3.3. received an undertaking from the other CRA(s) that a new rating has been assigned to such security.5 12.4. Withdrawal norms in case of multiple ratings outstanding on rated security: In case of multiple ratings on a security (where there ....

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....ous stakeholders, including CRAs, it has been decided to prescribe as under: 13.1.1. Rating Symbol: All Provisional Ratings ('long term' or 'short term') for security shall be prefixed as 'Provisional' before the rating symbol in all communications viz. rating letter, press release / rating rationale, etc. 13.1.2. Standardized Term: A rating shall be considered as provisional, and not final, when it is contingent upon occurrence following steps or execution of following documents, as applicable: 13.1.2.1. execution of letter of comfort, corporate guarantee, or other forms of explicit third-party support; 13.1.2.2. execution of documents such as debenture trust deed/ debenture trustee agreement, legal agreements/ opinions, representations and warranties, final term sheet; 13.1.2.3. assignment of loan pools or finalisation of cash flow escrow arrangements; 13.1.2.4. setting up of debt service reserve account; 13.1.2.5. opening of escrow account; or 13.1.2.6. For a proposed Real Estate Investment Trust (REIT) or Infrastructure Investment Trust (InvIT), pending formation of a trust - only after receipt of SEBI Registration. However, the process of obtaining rating m....

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....4. While assigning provisional rating to a security proposed to be issued, the press release shall specify that in case the security is subsequently issued, the provisional rating would have to be converted into final rating as per the validity period prescribed at para 13.1.3 above. 13.1.4.5. While assigning provisional rating to an issued security, the press release shall specify the rating and timeline implications as per the validity period prescribed at para 13.1.3 above. 13.1.4.6. Furthermore, in case of provisional ratings for cases mentioned in para 13.1.2.6 above, the following disclosures shall also be required, wherever applicable: a. the broad details of the assets that are proposed to be held by the REIT/ InvIT, the proposed capital structure, etc. b. the rating rationale should disclose that the CRA has taken an undertaking from the sponsor stating that the key assumptions (relating to the assets, capital structure, etc.) are in consonance with the details filed by the sponsor with SEBI. c. In case of change in provisional rating due to change in aforesaid key assumptions, the press release shall state Page 28 of 104 B भारतà....

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....he explicit credit enhancement or specified support considerations, and 14.3.2. Supported rating after factoring in the explicit credit enhancement or specified support considerations Further, the Press Release shall also contain a detailed explanation of all the covenants of the security. 14.4. It is reiterated that while assigning such credit ratings, CRAS shall conduct independent due diligence on the nature of specified support consideration and form a definitive internal view / opinion, and, wherever warranted, obtain an independent external legal opinion for ascertaining the strength of the credit enhancement. 14.5. Furthermore, for such credit ratings, it is reiterated that CRAS shall verify the documentation related to the specified support considerations to ensure inter alia the following: 14.5.1. The support is unconditional, irrevocable, and legally enforceable till all the obligations of the rated security has been paid to the investors. 14.5.2. CRAS shall undertake independent examination of financial strength of the support provider to ascertain the ability to honour the obligations guaranteed by the support provider. 14.5.3. The support provider ha....

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....tee/sub-committee members 16.1.2. Composition of committee/sub-committee Page 31 of 104 இ भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 16.1.3. Minimum quorum required 16.1.4. Duties of committee members 16.1.5. System of voting and recording of dissent. 16.1.6. Managing conflict of interest in the rating committee/sub-committee. 16.2. MD/ CEO of a CRA and any person within CRA who has business responsibility shall not be a member of rating committees of the CRA.7 16.3. Rating committees of a CRA shall report to a Chief Ratings Officer (CRO). 16.4. Minutes of each case discussed at the committee shall be maintained and signed (digitally or manually) by the Chairperson. Standard format for the Minutes of Rating Committee Meeting is placed at the Annexure 16. 16.5. The process of discussion of case by circulation must be avoided, unless there is urgency in taking a rating action. 16.6. Chairperson(s) of each rating committee/sub-committee of the CRA shall, on an annual basis, undertake a revi....

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....ket) Regulations, 2003 by the CRA. 18.2. Strengthening of Rating Agreement 18.2.1. The Rating Agreement, signed between the CRA and its client (issuer/ borrower), shall have an additional clause stating that — "The client (issuer/ borrower) agrees to disclose the history and status (non-cooperation, non-payment of fees etc.) of previous rating relation with the earlier CRA(s) to the new CRA along with reasons for non- cooperation, etc. if applicable." 18.2.2. In order to ensure cooperation from the Issuer, as required under Regulation 14(d) of Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999, the following enabling clauses maybe built in the Rating Agreement: 18.2.2.1. "The client (issuer/ borrower) agrees to provide the information Page 33 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India sought by the CRA immediately, but not later than 7 days from the date of seeking such information by the CRA. In cases of delay/ default in servicing debt obligat....

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....ss and adhering to the timelines as specified in the Operations Manual/ Internal governing document. 21. Dealing with Conflict of interest 21.1. A CRA shall formulate the policies and internal codes for dealing with the conflict of interest. 21.2. A CRA shall ensure: 21.2.1. that its analysts do not participate in any kind of marketing and business development including negotiations of fees with the issuer whose securities are being rated, Page 35 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 21.2.2. that the employees' involved in the credit rating process and their dependents do not have ownership of the shares of the issuer. 21.2.3. prompt review of the credit ratings of the securities as and when any of its employees joins the respective issuer. 21.3. Avoiding conflict of interest while rating of structured finance products 21.3.1. While undertaking rating of structured finance products, apart from following all the applicable requirements in case of non-structured ratings, the fol....

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....ef Executive of the CRA for such prior approval. c. The CEO/Compliance Officer shall ensure that there is no conflict of interest while considering the request for prior approval. d. Such approvals, if granted, shall be valid for 7 working days from the date of approval. 21.4.3.4. Disclosures a. Any person, who becomes an employee of the CRA, shall submit a statement of holding of all securities in respect of persons mentioned at para 21.4.2. above to the Compliance officer or Chief Executive, as the case may be, within 7 working days of joining CRA. b. All employees of CRA including the Access Persons shall submit the following details to the CEO/Compliance Officer, as the case may be: Page 37 of 104 B भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India i. Details of purchase or sale transactions effected within 7 working days from the date of transaction. ii. A consolidated statement of holding of all securities within 30 working days from the end of the Financial Year. c. The members of the Rat....

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....ancial sector regulators/ authorities as specified in Annexure 18. CRAS may also undertake research activities, incidental to rating, such as research for Economy, Industries and Companies. 24A. Guidelines on the listed securities/instruments/products falling under the purview of other financial sector regulator/s or authority/ies' 9 or Certain instruments/products/securities are regulated by other financial sector regulator/s authority/ies and could be listed or unlisted. The issuers of such instruments/products/securities and any person connected therewith (such as CRAs) shall abide by the rules/regulations/directions/guidelines applicable to or governing such instruments/products/securities as prescribed by such financial sector regulator or authority whether such instruments/products/securities be listed or unlisted. Further, if such instruments/products/securities are listed on a Recognised Stock Exchange, the rules/regulations/ directions/ guidelines specified by the Board from time to time shall continue to be applicable. 9 Inserted vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 Page 39 of 104 GB भारतà....

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....rance levels: 25.2.6.1. For AAA: a. Zero for 1-year and 2-year default rate. b. Zero for 3-year default rate, with a tolerance level of 1%. 25.2.6.2. For AA: a. Zero for 1-year default rate. b. Zero for 2-year default rate with a tolerance level of 2%. 25.2.6.3. For A: a. Zero for 1-year default rate with a tolerance level of 3%. 25.2.7. For ratings on non-structured instruments, various instruments of an issuer with equal seniority level and having same rating shall not be included separately for default rate calculation. However, various instruments of an issuer having different seniority levels shall be included as separate instances, subject to a cap of three instances across all rating categories put together. 25.2.8. For ratings on structured instruments, various instruments, issued by a trust, with the same degree of seniority and hence having same rating shall not be included separately for default rate calculation. However, various instruments, issued by a trust, having different seniority levels shall be included as separate instances. Further, in order to avoid under-estimation of default rates in case of significantly higher number of tranches of dif....

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....nvestment grade and vice versa (Annexure 22) and 26.3.1.4. The history of credit rating of all outstanding securities (Annexure 23), 26.3.1.5. On half yearly basis, the list of defaults separately for each rating category (e.g. AAA, AA, A, BBB, BB, B, C) {(Annexure 24)}. Page 42 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 26.3.2. Structured Finance Products: A CRA shall disclose at least once in every six months, the performance of the rated pool, i.e., collection efficiency, delinquencies. A CRA shall also provide a detailed description of the underlying pools including ageing, Credit enhancements such as liquidity supports, first and second loss guarantee provided shall also be disclosed. 26.3.3. Disclosure of performance of CRAS on Stock Exchange and Depository website 26.3.3.1. Each CRA shall furnish data on sharp rating actions in investment grade rating category, as per the format specified in Annexure 25, to Stock Exchanges and Depositories for disclosure on website on half-year....

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....als. For securities, the withdrawn rating shall be included in the computation of default rates till the completion of the cohort or the maturity of the instrument, whichever is earlier. Accordingly, all DTs shall continue to report any delays/default in payment on debentures to the CRA(s) having rated the said debenture for the lifetime of the instrument, irrespective of the rating on that instrument being withdrawn. c. Ratings of non-cooperative issuers shall be included in the cohort under the rating category in which the instrument is currently being rated. 26.4.1.3. Based on approach mentioned at para 26.4.1.2, CRA shall disclose, on an annual basis, the average one-year, two-year and three-year cumulative default rates (based on weighted average) each for: a. Last 10-financial years period (Long-run average default rates) b. 24, 36 and 48 most recent cohorts, respectively (Short-run average default rates) Page 44 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 26.4.1.4. The format....

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....ance of a CRA and provide an insight on the stability of ratings over a period of time. In order to promote transparency and to enable the market to best judge the performance of the ratings, the CRA should publish information about the historical average rating transition rates across various rating categories, so that investors can understand the historical performance of the ratings assigned by the CRAS. 26.4.2.2. CRAS shall publish their average one-year rating transition rate over a 5-year period, on their respective websites, which shall be calculated as the weighted average of transitions for each rating category, across all static pools in the 5-year period. The format of the disclosure of transition rates is enclosed as Annexure 27. For the said purpose, the following terms shall have the meaning as under: a. Static Pool: Ratings outstanding for each category at the beginning of any financial year. However, it shall exclude ratings that have been withdrawn or ratings of non-cooperative issuers during the financial year. Ratings downgraded to D shall be treated as default for the rest of the financial year. Ratings which are upgraded from D shall be consid....

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....g for the relevant subsequent static pools. 26.4.3.4. In the disclosure at para 26.4.3.3 (b) above, a CRA shall include an additional column to indicate the proportion of ratings that were withdrawn during the financial year. Page 47 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 26.4.3.5. The disclosures under paragraph 26.4.3 shall be applicable for Financial year 2022-2023 26.4.4. Income: A CRA shall disclose: 26.4.4.1. its total receipt from rating services and non-rating services, 26.4.4.2. issuer wise percentage share of non-rating income of the CRA and its subsidiary to the total revenue of the CRA and its subsidiary from that issuer, and 26.4.4.3. names of the rated issuers who along with their associates contribute 10% or more of total revenue of the CRA and its subsidiaries. 26.4.5. Unsolicited Credit Ratings: A CRA shall disclose following as prescribed at Annexure 28: 26.4.5.1. all the unsolicited ratings carried out in the last three financial years; 26.4.5.2. names of iss....

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....ing 5 working days of communication of rating by the CRA to the Issuer In case rating is not accepted by the Issuer within a month of communication of rating by the CRA to the Issuer, the same shall be disclosed as Non-Accepted Rating on the CRA's website 2 working days of acceptance of Rating by the Issuer 10 Modified vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 Page 49 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 27.3.3. Periodic Surveillance Scenario Dissemination of Press Release on CRA's website and intimation of same to Stock Exchange/ Debenture Trustee Timeline - immediately but not later than 5 working days of Committee Meeting Rating 27.3.4. Dissemination of Press Release on CRA's website and intimation of same to Stock Exchange/ Debenture Trustee in case of event based review Scenario from Issuer/ Intimation Debenture Trustee/ Bankers of the Issuer regarding delay in servicing debt Obligation Material Events requiring r....

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....ed epted acce rating pted ? ratin gs discl osur e? 27.6. Disclosures in case of delay in periodic review: (Yes/ No) Each CRA shall promptly disclose on its website details of all such ratings where the review became due but was not completed by the due date, as per the timelines specified in the CRA's Operations Manual/ Internal governing document. Details disclosed shall include the name of the issuer, name/ security type, size of the issue, date of last review, reasons for delay in periodic review, hyperlink to the last Press Release etc. 11 Modified vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 Page 51 of 104 இ भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 27.7. Disclosure of guidelines for dealing with Conflict of Interest: The policies adopted by the CRAs for effective implementation of guidelines for dealing with Conflict of Interest for investment/ trading by CRAs, Access Persons and other employees, shall be disclosed on the CRAs' websit....

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....osures by CRAS on its website: 30.1. In order to facilitate enhanced transparency and usability of disclosures made by CRAS on their websites, the following is directed: 30.1.1. Disclosures required by CRAS on their websites under various SEBI circulars should be provided in excel / machine readable format. 30.1.2. An archive of all disclosures should be maintained by CRAS on their website, for at least 10 years. This also includes ratings press releases by CRAS. 30.1.3. CRAS may add footnotes in the disclosures mandated by SEBI for purpose of better understanding of methodology of such disclosure by stakeholder's subject to methodology explained being in line with the SEBI Regulations and circulars issued thereunder. 30.1.4. The provisions under para 30.1.1 to 30.1.2 shall be applicable for Website Disclosures made after March 31, 2023. Page 53 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Chapter IV: INTERNAL AUDIT FOR CRAS 31. Internal Audit for CRAS: 31.1. The audit envisaged under....

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.... years, with a cooling-off period of two years. 32.3. Scope of the Internal Audit: The scope of the internal audit shall be expanded to include the following additional checks: 32.3.1. CRA and its employees, who are associated directly or indirectly with the rating business, have complied with the regulations and code of conduct. 32.3.2. CRA has defined processes for operations that have been followed during the rating exercise. 32.3.3. Rating analysts have adhered to their roles and responsibilities laid down in the Operations Manual/Internal governing document and processes disclosed on the CRA's website, during the rating 32.3.4. Policy in respect of non-cooperation by the issuer, including procedures to be followed for the same, have been complied with. 32.3.5. CRA has framed a policy for default recognition, consistent with regulatory guidelines, and is adhering to the same. At a minimum, it shall be checked if any irregularities/ delays/ defaults in debt servicing had been indicated by any of the below mentioned entities and suitable action with regard to the same was taken by the CRA: Page 55 of 104 भारतीय प्रà....

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....ard Meeting of the CRA, whichever is later, in the following format: Sr. Observatio Remarks by No. ns of the auditor the Compliance Officer Page 57 of 104 Comments of the Board of the CRA Corrective actions taken GB | भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Chapter V Miscellaneous 33. Designated e-mail ID for regulatory communication with SEBI: 33.1. SEBI has been communicating with the registered market intermediaries inter-alia CRAS through circulars, letters, directions etc. In order to facilitate the issuance of digitally signed circulars, all registered CRAS are required to create a designated email id for regulatory communications. This email id shall be an exclusive email id only for the above purpose and should not be a person centric email id. 33.2. The Designated e-mail ID shall be communicated to SEBI by emailing a file in an excel format to [email protected], as per the format prescribed below. 33.3. The name of the file and the subject of the email shall speci....

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....dated in the SEBI (Credit Rating Agencies) Regulations, 1999 read with relevant circulars issued from time to time by SEBI. On the lines of Principle 8 of the International Organisation of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulations, it has been decided to put in place comprehensive guidelines to collectively cover CRAs and their associated persons, for elimination of their conflict of interest, as detailed hereunder. 36.2. CRAS shall adhere to these guidelines for avoiding or dealing with or managing conflict of interest. They shall be responsible for educating their associated persons for compliance of these guidelines. 36.3. For the purpose of these guidelines "associated persons" have the same meaning as defined in Securities and Exchange Board of India Certification of Associated Persons in the Securities Markets) Regulations, 2007. Page 59 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 36.4. CRAS and their associated persons shall: 36.4.1. lay d....

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....ment of conflict of interest situations. The Boards shall review the compliance of this circular periodically. 36.6. These guidelines shall be in addition to the provisions, if any, contained in respective regulations/ circulars issued by the Board from time to time regarding dealing with conflict of interest, in respect of such entities 37. Standardization of industry classification- Applicability to CRAS 37.1. The Market Data Advisory Committee (MDAC), a standing committee constituted by SEBI, comprising of representatives from stock exchanges, depositories and other market participants, examined the existing industry classification structures, across sectors, and developed a harmonised four level industry classification framework for adoption by all stakeholders and for all relevant processes/ purposes in Indian securities market. 37.2. As the standardized framework will help bring about uniformity in the classifications being used across sectors and in securities market, CRAS are advised to use this standardized industry classification published by recognized Stock Exchanges for the purpose of rating exercise, peer benchmarking, research activities including res....

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.... and the non-rating entity. Such disclosure shall be updated by the CRA on the first working day of each month. The disclosure should include a reference to the date it was last updated by the CRA, along with a reference or hyperlink to archives of previous such disclosures. Page 62 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 38.2.3. Credit rating scales (i.e., symbols and definitions) prescribed by this SEBI circular issued under the SEBI (Credit Rating Agencies) Regulations, 1999, shall not be used by any non-rating entities of the CRA. 38.2.4. The websites of SEBI-registered CRAS and their non-rating entities shall be separate. ACRA's website may contain hyperlinks to the separate websites of the non-rating entities 38.2.5. Applicability: CRAS shall report on their compliance with this circular (as ratified by their respective board of directors) to SEBI within one quarter from the date of applicability of this circular. 38.2.6. Monitoring: Monitoring of the provisions under para 38....

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....RSD/ DOS3/CIR/P/2018/140 Guidelines for Enhanced Disclosures by Credit dated November 13, 2018 Rating Agencies (CRAs) 15. Circular No. SEBI/ HO/MIRSD/ DOS3/CIR/P/2019/70 Guidelines for Enhanced Disclosures by Credit dated June 13, 2019 16. Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2019/121 dated November 04, 2019 Rating Agencies (CRAs) Enhanced Governance Norms for Credit Rating Agencies (CRAs) 17. Circular No. SEBI/HO/MIRSD/CRADT/CIR/P/2020/2 Strengthening of the rating process in respect dated January 03, 2020 of 'INC' ratings 18. Circular No. SEBI/ HO/MIRSD/ CRADT/CIR/P/ 2020/ Review of Post-Default Curing Period for CRAS 87 dated May 21, 2020 19. Circular No. SEBI/ HO/ MIRSD/MIRSD_CRADT/ P/ | Standardizing and Strengthening Policies on CIR/2021/554 dated April 27, 2021 Provisional Rating by Credit Rating Agencies (CRAs)for Debt Instruments Page 64 of 104 S.No. GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Reference Number of Circular 20. Circular SEBI/HO/MIRSD/MIRSD_CRADT/P/CIR/2021/59....

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.... single window Circular No. CIR/MIRSD/19/2011 dated Processing of Investor Complaints in SEBI August 26,2011; 5. SEBI Circular No. CIR/MIRSD/24/2011 dated December 15, 2011 Complaints Redress System (SCORES) Guidelines on Outsourcing of Activities Intermediaries by 6. Circular No. CIR/MIRSD/3/2013 dated Sharing of information regarding issuer companies Page 65 of 104 S.No. 7. Reference GB Number भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India SEBI Circular Name of Circular included in Operational Circular March 15, 2013 Circular No. CIR/ MIRSD/ 5/ 2013 dated August 27, 2013 Circular No. CIR/MIRSD/3/2014 dated August 28, 2014 8. 9. Circular 10. SEBI/HO/MIRSD/MIRSD1/CIR/P/2017/38 dated May 02, 2017 Circular SEBI/HO/MIRSD/DOR/CIR/P/2021/46 dated March 26, 2021 No. between Debenture Trustees and Credit Rating Agencies General Guidelines for dealing with Conflicts of Interest of Intermediaries, Recognised Stock Exchanges, Recognised Clearing Corporations, Depositories and their A....

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.... of 104 B भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Annexure 2 Rating Symbols and Definitions for Long Term Securities Long term securities: The securities with original maturity exceeding one year Rating symbols should have CRA's first name as prefix AAA - Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk. AA - Securities with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such securities carry very low credit risk. A Securities with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such securities carry low credit risk. BBB - Securities with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such securities carry moderate credit risk. BB - Securities with this rating are considered t....

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....ng Term Structured Finance Instruments Long term structured finance instruments: The instruments with original maturity exceeding one year Rating symbols should have CRA's first name as prefix AAA (SO) - Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. AA (SO) - Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. A (SO) - Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk - BBB (SO) Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk. BB(SO) - Instruments with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations. - B(SO) Instruments with this rating are considered to have high risk of default regarding timely servicing of ....

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.... - Schemes with this rating are considered to have the adequate degree of safety regarding timely receipt of payments from the investments that they have made. BBBmfs - Schemes with this rating are considered to have the moderate degree of safety regarding timely receipt of payments from the investments that they have made. BBmfs Schemes with this rating are considered to have moderate risk of default regarding timely receipt of payments from the investments that they have made. - Bmfs Schemes with this rating are considered to have high risk of default regarding timely receipt of timely receipt of payments from the investments that they have made. Cmfs - Schemes with this rating are considered to have very high risk of default regarding timely receipt of timely receipt of payments from the investments that they have made. Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories AAmfs to Cmfs. The modifiers reflect the comparative Page 72 of 104 standing within the category Annexure 7 Rating Symbols and Definitions for Short Term Debt Mutual Fund Schemes Short term debt mutual fund schemes: The debt mutual fund schemes that ....

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.... standing within the category. Page 74 of 104 Annexure 9 Rating Symbols and Definitions for Long Term Credit Enhanced Securities Long term Credit Enhancement securities: The securities with original maturity exceeding one year Rating symbols should have CRA's first name as prefix. AAA (CE) - Securities with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such securities carry lowest credit risk. AA (CE) Securities with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such securities carry very low credit risk. A (CE) - Securities with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such securities carry low credit risk. BBB (CE) - Securities with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such securities carry moderate credit risk. - BB (CE) Securities with this rating are considered to have moderate risk of default regarding timely servicing of financial obligations. - B (CE) Securities with thi....

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....g their restructuring application/ proposal shall be considered as a default. Rescheduling of the debt instrument by the lenders prior to the due date of payment will not be treated as default, unless the same is done to avoid default or bankruptcy. Το Annexure 12 Standard Template for No Default Statement (Minimum Information be sought) Dear Sir/Madam, 1. We hereby Confirm that as on date there are no Over dues or default on our listed debt obligations. 2. We hereby Confirm that as on date there are no Over dues or default on our unlisted debt obligations. 3. We also confirm that in the month ended , there has been no instance of delay in servicing of our listed debt obligations. 4. We also confirm that in the month ended , there has been no instance of delay in servicing of our unlisted debt obligations. 5. We also confirm that in the month ended , there has been no instance of delay in servicing of debt obligations guaranteed by us. 6. We hereby Confirm that as on date there are no Over dues or default on payment of interest/installment obligations on loans from banks/financial institutions which continues beyond 30 days. 7. We hereby Confirm th....

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.... financial indicators and ratios for the Issuer for the last and current financial year, in tabular form, as well as any other significant information relevant to the Issuer and its Sector. Status of non-cooperation with previous CRA (if applicable): Reason and comments on status of non-co-operation with the previous CRA (if applicable). Rating Sensitivity: Any other information: Rating History for last three years: Page 80 of 104 இ S.No Name of security भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Current Rating (Year T) Chronology of Rating History for the past 3 years (Rating Assigned and Press Date) along with Outlook/ Watch, if applicable Release Туре (long term/ Amount Outstandi Rating Date(s) & Date(s) & Date(s) Rating(s) Rating(s) Rating(s) Short term) ng assigned assigned assigned (INR Crores) T-1 in Year in T-2 Year in T-3 Year Note on complexity levels of the rated security: Name and Contact Details of the Rating Analyst(s): About CRA: CRA D....

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.... 7. Guaranteed Pooled bond issuance (PBI), not through a trust 8. Obligor/Co-obligor structures or Cross-default guarantee structures 9. Debt backed by Payment Waterfall /Escrow, or DSRA etc., but with Full Guarantee or DSRA Replenishment Guarantee from a third party 10. Letter of comfort Page 83 of 104 GB भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Summary Record of the Rating Committee Meeting (RCM) A. Preliminary Information Annexure 16 Date of the RCM Names of all the persons attending the RCM Names of rating committee members present (only rating committee members will have voting rights) Name of the chairperson of the meeting Any other special invitees (if any) B. Information Relating to Rating Decision Following information/details of each rating decision shall be captured: Name of the rated issuer/entity Rating exercise i.e. whether it is a fresh rating or review/ surveillance case Rating outcome i.e. rating assigned, along with rating outlook and special rating symbol, if any Summ....

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....l be shared as and when available. Page 85 of 104 भारतीय प्रतिभूति और विनिमय बोर्ड ✓Bi Securities and Exchange Board of India Financial sector regulators/ authorities ANNEXURE 18 1. Securities and Exchange Board of India 2. Reserve Bank of India 3. Insurance Regulatory and Development Authority of India 4. Pension Fund Regulatory and Development Authority 5. Ministry of Corporate Affairs 6. Insolvency and Bankruptcy Board of India Page 86 of 104 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India ANNEXURE 1912 Format for Half-Yearly Rating Summary Sheet S.N Parameter 0. 1. New Ratings 2. Upgrades a. Total Upgrades b. Upgrades from Non- Investment to Investment Grade 3. a. b. Downgrades Total Downgrades Downgrades from Investment to Non-Investment Grade Defaults Total Defaults 4. a. b. Default from Non- Investment Grade C. ....

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.... Release for Rating downgra ded *Will cover only rating changes. Reaffirmations shall be excluded" Trigger Event Quarterly Results, Exchange Disclosure S, Annual surveillance etc.) 14 Modified vide Circular No. SEBI/HO/DDHS/DDHS-RACPOD2/P/CIR/2023/19 dated February 03, 2023 Page 89 of 104 भारतीय प्रतिभूति और विनिमय बोर्ड ✓Bi Securities and Exchange Board of India Annexure 22 Movement of each credit rating from investment grade to non-investment grade and vice versa Rating Movement from Investment Grade and Non-Investment Grade between Apr Sep/Oct – Mar From Investment Grade to Non-Investment Grade S ΖΟ Name of the Issuer S O Sector Security Type Listing Status (Listed Rating prior to Revision Rating post Revisio /Propo n sed to be listed) From Non-Investment Grade to Investment Grade Name of the Issuer Sector Security Type Page 90 of 104 Listing Status Rating prior to (Listed Revision Rating post Revisio /Propo n sed to be listed) SNO Na me of ....

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.... A1 2 2 2 Rating prior to default category - A2 - Rating prior to default A3 category Rating prior to default category - A4 Page 93 of 104 Bi भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Sharp rating actions in investment grade rating category (excluding non-cooperative issuers) S. No. Rating action 1 2 Number of rating downgrades of more than 3 notches Number of downgrades to default from investment grade ratings 3 Number of outstanding ratings as on March 31/ September 30 Page 94 of 104 Annexure 25 Number of ratings SB Rating भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Annexure 26 Long-run average default rates for long term instruments Category 1-Year Default Rate 2-year Cumulative Default Rate 3-year Cumulative Default Rate AAA AA A BBB BB B C Long-run average default rates for short t....

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....ivities undertaken under that policy. 1.1 The policy shall cover activities or the nature of activities that can be outsourced, the authorities who can approve outsourcing of such activities, and the selection of third party to whom it can be outsourced. For example, an activity shall not be outsourced if it would impair the supervisory authority's right to assess, or its ability to supervise the business of the CRA. The policy shall be based on an evaluation of risk concentrations, limits on the acceptable overall level of outsourced activities, risks arising from outsourcing multiple activities to the same entity, etc. 1.2 The Board shall mandate a regular review of outsourcing policy for such activities in the wake of changing business environment. It shall also have overall responsibility for ensuring that all ongoing outsourcing decisions taken by the CRA and the activities undertaken by the third-party, are in keeping with its outsourcing policy. 2. The CRA shall establish a comprehensive outsourcing risk management programme to address the outsourced activities and the relationship with the third party. 2.1 The CRA shall make an assessment of outsourcing ri....

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.... बोर्ड Securities and Exchange Board of India the financial and operational capabilities of the third party in order to assess its ability to continue to meet its outsourcing obligations. 3. The CRA shall ensure that outsourcing arrangements neither diminish its ability to fulfill its obligations to customers and regulators, nor impede effective supervision by the regulators. 3.1 The CRA shall be fully liable and accountable for the activities that are being outsourced to the same extent as if the service were provided in- house. 3.2 Outsourcing arrangements shall not affect the rights of an investor or client against the CRA in any manner. The CRA shall be liable to the investors for the loss incurred by them due to the failure of the third party and also be responsible for redressal of the grievances received from investors arising out of activities rendered by the third party. 3.3 The facilities / premises / data that are involved in carrying out the outsourced activity by the service provider shall be deemed to be those of the registered CRA. The CRA itself and Regulator or the persons authorized by it shall have the right to access ....

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....indemnity by the parties; c) provides for the liability of the third party to the CRA for unsatisfactory performance/other breach of the contract d) provides for the continuous monitoring and assessment by the CRA of the third party so that any necessary corrective measures can be taken up immediately, i.e., the contract shall enable the CRA to retain Page 101 of 104 இ भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India an appropriate level of control over the outsourcing and the right to intervene with appropriate measures to meet legal and regulatory obligations; e) includes, where necessary, conditions of sub-contracting by the third- party, i.e. the contract shall enable CRA to maintain a similar control over the risks when a third party outsources to further third parties as in the original direct outsourcing; f) has unambiguous confidentiality clauses to ensure protection of proprietary and customer data during the tenure of the contract and also after the expiry of the contract; g) specif....