TaxTMI 
TaxTMI 
Master Circular for Credit Rating Agencies
X X X X Extracts X X X X
X X X X Extracts X X X X
....or CRAs has been prepared. III. This Master Circular is a compilation of the existing circulars as on July 03, 2023, with consequent changes. The stipulations contained in these circulars have been detailed chapter-wise in this master circular. Accordingly, the list of existing circulars for CRAs which have been superseded by this master Circular is placed at Annexure A. IV. Notwithstanding such rescission,- a. anything done or any action taken or purported to have been done or taken under the rescinded circulars, prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular; b. any application made to the Board under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of these regulations; V. This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 interest of investors in securities and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 (SEBI regulated business activity) from one legal entity which is a SEBI registered Intermediary (transferor) to other legal entity (transferee). In this regard, following is cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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'); 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 information when requested and payment of fees as required under CRA Regulations ; 4.1.1.7. take such other action including providing any records or documents within the time period and in the manner, as may be required under the CRA Regulations or as may be directed by SEBI. 4.2. The CRA, on and from the date of acceptance of the Request, or when it is commencing the winding up process, shall: 4.2.1. return the certificate of registration so cancelled to SEBI; 4.2.2. not represent itself to be a holder of certificate for ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll 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 suspended, shall not be valid during the period of suspension. 4.8. Upon cancellation or surrender or suspension of certificate of registration of a CRA, the concerned CRA's services cannot be used by listed entities or issuers for compliance with requirements of various SEBI regulations which require credit ratings from a CRA registered with SEBI. 4.9. Listed entities or issuers who have obtained credit rating from a CRA whose registration is cancelled or suspended or surrendered, desirous of obtaining credit rating for regulatory purposes, shall obtain credit rating(s) from another SEBI- registered CRA(s) holding a valid certificate of registration unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egulation38A of SEBI (Mutual Fund) Regulations, 1996, CRAs shall use rating scales (i.e. symbols and their definitions) for 'structured finance (SO)' instruments as prescribed at Annexure 4-5. 5.1.5. For existing outstanding ratings, the CRAs shall: 5.1.5.1. disclose new rating symbols and definitions on their websites; 5.1.5.2. update their rating lists on their websites; and 5.2. Alignment of Rating Scales Used by CRAs 5.2.1. CRAs, in terms of Regulation 9(f) of SEBI (Credit Rating Agencies) Regulations, 1999, undertake ratings of various financial instruments under the guidelines of different financial sector regulators or authorities. 5.2.2. In order to standardise the usage of rating scales, CRAs are advised to align their rating scales with the rating scales prescribed under the guidelines of respective financial sector regulator or authority in terms of Regulation 9(f) of SEBI (Credit Rating Agencies) Regulations, 1999. 5.3. Issuer Rating/ Corporate Credit Rating 5.3.1. Issuer Rating/Corporate Credit Rating indicates the degree of safety of the issuer or the rated entity with regard to timely servicing o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rations Manual/ Internal governing document 6.1. The Operations Manual/ Internal governing document, formulated by the CRA, shall, inter-alia, cover operating guidelines, criteria, policies and procedures related to the rating process. 6.2. The contents of the Operations Manual/ Internal governing document, as well as any changes to the same, shall be communicated to employees promptly, and training of employees on the same shall be conducted at regular intervals. 6.3. The following shall be specified in the Operations Manual/ Internal governing document of CRAs: 6.3.1. Basic Minimum information required for conducting the Rating Exercise 6.3.2. External entities (bankers, auditors etc.) that need to be contacted 6.3.3. Mode of seeking information from external entities. CRAs should endeavour to obtain such information/confirmation in writing. 6.3.4. Policy regarding internal approvals and timelines at each step of the Rating Exercise. 6.3.5. Policy regarding monitoring and review of ratings, including the timelines within which such review is to be completed. 7. Rating Criteria 7.1. Each CRA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8.2.6. Confidentiality policy 8.2.7. Policy on outsourcing of activities 8.2.8. Policy on provisional ratings 8.2.9. FAQs on ratings 8.2.10. Disclosure on managing conflict of interest 8.3. Any change in the rating process or policies shall be disclosed on the CRA's website, while also providing a reference/ hyperlink to the original provision/ process/ policy, to enable the investors to discern the changes made to the same. 8.4. A CRA shall keep the following records in support of each credit rating and review/surveillance thereof: 8.4.1. The important factors underlying the credit rating and sensitivity of such credit rating to changes in these factors, 8.4.2. Summary of discussions with the issuer, its management, auditors and bankers which have a bearing on the credit rating, 8.4.3. Decisions of the rating committee(s), including voting details and notes of dissent, if any, by any member of the rating committee, and 8.4.4. If a quantitative model is a substantial component of the credit rating process, the rationale for any material difference between the credit rating implied b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g deterioration in credit quality/ debt servicing capability of the Issuer. 9.1.2. While carrying out "Monitoring of Repayment Schedules", CRAs shall analyse the deterioration in the liquidity conditions of the issuer and also take into account any asset-liability mismatch. 9.1.3. The CRA shall also monitor the Exchange website for disclosures made by the Issuer in this regard. 9.2. Material Events requiring a review 9.2.1. CRAs shall carry out a review of the ratings upon the occurrence of or announcement/ news of material events including, but not restricted to, the following: 9.2.1.1. Quarterly/ Half-yearly/ Annual results 9.2.1.2. Merger/ Demerger/ Amalgamation/ Acquisition 9.2.1.3. Corporate debt restructuring, reference to NCLT and winding-up petition filed by any party /creditors. 9.2.1.4. Significant decline in share prices/bond prices of the issuer or group companies which is not linked to overall market movement 9.2.1.5. Significant increase in debt level or cost of debt of the issuer company 9.2.1.6. Losses, sharp revenue de-growth etc. based on publicl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rmation, while maintaining the basic format of the Press Release. 10.1.2. While the Press release for the initial rating of bonds, debentures, etc. shall disclose information about the rated amount of the securities, the subsequent Press Releases shall also disclose additional details of the rated security, viz. coupon, maturity date, etc. 10.1.3. Rating Outlook: A 'rating outlook' indicates CRA's view on the expected direction of the rating movement in the near to medium term. Each CRA shall assign a rating Outlook and disclose the same in the Press Release. It is stated that following standard descriptors shall be specified for "Rating Outlook": 10.1.3.1. Stable 10.1.3.2. Positive 10.1.3.3. Negative 10.1.4. Rating Outlooks may not be assigned for: 10.1.4.1. Short term ratings 10.1.4.2. Ratings in the 'C' and 'D' categories 10.1.4.3. Ratings on watch 10.1.4.4. Ratings of securitization transactions backed by pool of loans, as CRAs are already mandated to disclose at least once in every six months the performance of the rated pool. 10.1.4.5. Credit quality ratings of mutual fund schem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the Press Release. 10.2. Disclosure of rating sensitivities in press release 10.2.1. The disclosure of factors to which the rating is sensitive, is critical for the end-users to understand the factors that would have the potential to impact the credit worthiness of the entity. 10.2.2. Accordingly, in order to improve transparency, the CRA shall have a specific section on 'Rating Sensitivities' in the Press Release which shall explain the broad level of operating and/ or financial performance levels that could trigger a rating change, upward and downward. 10.2.3. Such factors shall be disclosed in quantitative terms to the extent possible, discernible to the investors, and should not read like a general risk factor. 10.3. Disclosure on liquidity indicators: In order to make the disclosures meaningful 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....period of 7 days of three consecutive months of non-submission of NDS. The CRA in its judgement may migrate a rating to the INC category before the expiry of three consecutive months of non-receipt of NDS. 11.4. CRAs shall also formulate a policy on "Minimum/ Indicative Information requirement" in terms of various sectors or types of ratings (limited to credit ratings of securities that are listed, or proposed to be listed, on a recognized stock exchange, and other credit ratings that are required under various SEBI Regulations or circulars 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. Over time, the number of issuers that are non-cooperative with CRAs have increased, with a vast majority of INC issuers being unlisted and small entities. In this regard, to provide enhanced transparency and information regarding non-cooperative issuers to various stakeholders, market partici....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11.6 of the master circular shall be applicable with effect from July 15, 2023, and CRAs shall report on their compliance with this circular (as ratified by their respective board of directors) to SEBI within one quarter. 11.11. Monitoring of the provisions under para 11.6 shall be done in terms of the half-yearly internal audit for CRAs, mandated under Regulation 22 of the SEBI (Credit Rating Agencies) Regulations, 1999 and guidelines issued thereunder. 12. Withdrawal of ratings 12.1. Withdrawal of ratings of Open-Ended Mutual Fund Schemes 12.1.1. Open ended Mutual Fund schemes being perpetual in nature and having no specified maturity, withdrawal of rating of such schemes is permitted. However, as units of such schemes are held by many investors, such ratings shall be placed on notice of withdrawal for at least 30 days, which shall be publicly available on the CRA's website. 12.1.2. Ratings of the aforementioned schemes can be withdrawn after receiving request for withdrawal from the Asset Management Company (AMC) in case of mutual funds; 12.2. Press Release for Withdrawal of Rating of a rated sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be withdrawn unless the security is redeemed. Often, this can result in the issuer of such bonds to stop cooperating with the CRA. 12.5.2. Therefore, to facilitate withdrawal of ratings of perpetual debt securities that are listed or proposed to be listed on a recognized stock exchange, it is proposed to revise withdrawal norms of ratings of such securities. Accordingly, a CRA may withdraw ratings of such securities provided that the CRA has: 12.5.2.1. rated such security/ies continuously for 5 years; and 12.5.2.2. received an undertaking from the Issuer that a rating is available on such security/ies; and 12.5.2.3. received an undertaking from the other CRA(s) that a rating is available on such security/ies. 13. Provisional Rating by CRAs 13.1. In order to strengthen and standardize the policies on provisional rating, subsequent to consultation with various 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 comm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2. risks associated with the provisional nature of the credit rating, including risk factors that are present in the absence of completed documentation / steps. 13.1.4.3. rating that would have been assigned in absence of the pending steps/ documentation considered while assigning provisional rating. In cases where the absence of said steps/ documentation would not result in any rating being assigned by the CRA (for instance, in case of provisional rating for REIT/ InvIT - pending formation of trust), the CRA shall specify the same in the press release. 13.1.4.4. 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 dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e press release for credit ratings, with or without the CE-suffix, backed by specified support considerations shall contain the following disclosures: 14.3.1. Unsupported ratings without factoring in the 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l/ Internal governing document of each CRA and disclosed on its website: 16.1.1. Eligibility for becoming committee/sub-committee members 16.1.2. Composition of committee/sub-committee 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. 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 review of the decisions taken by the Committee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ious 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 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 obligations, the information shall be provided immediately. Failure to provide the same immediately shall be considered as suppression of material information and 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" 18.2.2.2. "The client (issuer) agrees to inform the CRA details about the security/ies in the format below immediately, but not later than 7 days from the date of placing the se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rompt 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 following additional requirements shall also be complied with. 21.3.2. A CRA or its subsidiaries shall not provide consultancy or advisory services regarding the design of structured finance instrument. 21.4. Guidelines for dealing with Conflict of Interest for investment/ trading by CRAs, Access Persons and other employees 21.4.1. These Guidelines shall be applicable in case of investment / trading by CRAs and Access Persons connected to CRAs and in case of disclosures to all employees of CRAs. Explanation: "Access Persons" means officials of CRA appointed as Chief Executive or by any other designation (such as CEO/MD/President or by whatever name called who are performing functions similar to those of the Chief Executive), the employees of CRA doing the function of analyst, or comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Financial Year. c. The members of the Rating Committee shall upfront declare / disclose their interest, if any, to the Chief Executive Officer or Compliance Officer, as per the policy of the CRA, in the securities/instruments/facilities that are considered for rating by the CRA. 21.4.3.5. Restrictions on employees holding ownership of securities of the issuer: A CRA shall ensure that employees involved in the rating process shall not have ownership of the securities of the issuer. 22. Unsolicited Credit Ratings 22.1. In case of unsolicited credit ratings, i.e. the credit ratings not arising out of the agreement between a CRA and the issuer, credit rating symbol shall be accompanied by the word "UNSOLICITED" in the same font size. 22.2. A CRA shall monitor and disclose credit rating during the life of the rated securities, as if it were a solicited rating. 23. Sharing of information regarding issuer companies between Debenture Trustees and CRAs 23.1. SEBI (Debenture Trustee) Regulations, 1993 require the Debenture Trustees (DTs) to share information regardin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e investors to discern the performance of a CRA vis-à-vis a standardized PD benchmark scale, CRAs, in consultation with SEBI, shall prepare and disclose standardized and uniform PD benchmarks for each rating category on their website, for one-year, two-year and three-year cumulative default rates, both for short-run and long-run. 25.2. These benchmarks shall be prepared based on the following key principles: 25.2.1. Marginal Default Rate (MDR) approach, using monthly static pool, for last 10-year period. 25.2.2. The short-run benchmarks may account for spikes due to economic cycles or unforeseen events, and hence, may have a wider band. The same shall be computed based on a confidence interval of 99.7% over the weighted average of 1-year, 2-year and 3-year default rates pertaining to last 10- year period, making adjustments to achieve ordinality, wherever required. 25.2.3. The long-run benchmarks iron out economic cycles since these are over a longer tenure (10-year period) and may, therefore, be narrower. The same shall be computed based on a confidence interval of 95% over the weighted average default rates (1-year, 2-year and 3-year) pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by a CRA. 25.2.11. CRAs may review their rating methodologies in order to align the same with the proposed PD benchmarks. 26. Periodic Disclosures 26.1. A CRA shall make all the disclosures stipulated below on their websites. In case of listed securities, the CRA shall also make disclosures to the stock exchanges as specified in the SEBI (Credit Ratings) Regulations, 1999. For ratings assigned and their periodic reviews, the CRA shall issue press releases which shall also be kept on their websites. Where a specific format has been prescribed, the disclosures shall be made in that format. 26.2. A CRA can make additional disclosures other than those stipulated above with the prior approval of its Board. 26.3. Disclosures by CRAs on half-yearly basis: CRA shall make following disclosures within 15 days from the end of each half-year (March / September): 26.3.1. Disclosures on Credit Rating History, defaults and movement: The following disclosures shall be prepared and disclosed for ratings of securities: 26.3.1.1. A Rating Summary Sheet presenting a snapshot of the rating actions carried out ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng non-cooperative issuers, CRAs shall also separately disclose sharp rating actions including such actions on non-cooperative issuers. 26.3.3.4. The disclosure on sharp rating actions shall be limited to credit ratings of securities that are listed, or proposed to be listed, on a recognized stock exchange, and other credit ratings that are required under various SEBI Regulations or circulars thereunder. 26.3.3.5. The disclosure of sharp rating action in terms of para 26.3.3.2 to 26.3.3.4 shall be applicable from H1 of Financial Year 2022-23. 26.4. Disclosures by CRAs on annual basis: CRA shall make following disclosures within 30 days from the end of each financial year (March): 26.4.1. Computation and disclosure of Default Rates 26.4.1.1. The CRA, shall publish information about the historical default rates of CRA rating categories and whether the default rates of these categories have changed over time, so that the public can understand the historical performance of each category and if and how rating categories have changed, and be able to draw quality comparisons among ratings given by different CRAs. 26.4.1.2. The cumulati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ach, 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. 26.4.1.8. In addition to disclosure on cumulative default rates (CDR) which includes non-cooperative issuers and various types of credit ratings, CRAs from Financial year 2022-2023, shall also disclose, separately, two other CDRs limited to credit ratings of securities that are listed, or proposed to be listed, on a recognized stock exchange: a. CDR (ii), wherein ratings of non-cooperative issuers shall be included in the cohort under the rating category in which the instrument is currently being rated. b. CDR (iii), wherein ratings of non-cooperative issuers shall be excluded in the cohort under the rating category in which the instrument is currently being rated. 26.4.2. Disclosure of Average Rating Transition Rates for long-term Instruments 26.4.2.1. Transition studies are central to evaluating the performance of a CRA and provide an insight on the stability of ratings over a period of time. In order to promote transparency and to e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ized stock exchange) using the following definition of static pool: a. Static Pool: Ratings outstanding for each category at the beginning of any financial year. 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 considered as new rating for the relevant subsequent static pools. b. Static Pool: Ratings outstanding for each category at the beginning of any financial year. It shall include 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 considered as new rating 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. 26.4.3.5. The disclosures under paragraph 26.4.3 shall be applicable for Financial year 2022-2023 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... press releases as per requirements of Regulation 15 and 16 of SEBI (CRA) Regulations, following is clarified: 27.3.2. Initial Rating Scenario Timelines - immediately but not later than Communication of the rating assigned to issuer 2 working days of rating committee meeting Acceptance of Rating or request for review/appeal of Rating by the Issuer 5 working days of communication of rating by the CRA to the Issuer Disclosure of rating as non- accepted Rating 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 Dissemination of Press Release on CRA's website and intimation of same to Stock Exchange/Debenture Trustee 2 working days of acceptance of Rating by the Issuer 27.3.3. Periodic Surveillance Scenario Timeline - immediately but not later than Dissemination of Press Release on CRA's website and intimation of same to Stock Exchange/ Debenture Trustee 5 working days of Rating Committee Meeting 27.3.4. Dissemination of Press Release on CRA's website and intimation of same to Stock E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g was granted by CRA. (8) (9) (10) (11) (12) (13) 27.6. Disclosures in case of delay in periodic review: 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. 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' website. 28. Periodical report to be submitted to SEBI: 28.1. All CRAs shall report the following change(s) to SEBI while submitting the Action Taken Report in accordance with para 32.4 of the master circular: 28.1.1. Amalgamation, demerger, consolidation or....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 31. Internal Audit for CRAs: 31.1. The audit envisaged under Regulation 22 of the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 shall include an internal audit to be undertaken in the following manner: 31.1.1. It shall be conducted on a half yearly basis. 31.1.2. It shall be conducted by Chartered Accountants, Company Secretaries or Cost and Management Accountants who are in practice and who do not have any conflict of interest with the CRA. 31.1.3. It shall cover all aspects of CRA operations and procedures, including investor gri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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: 32.3.5.1. The issuer/ borrower 32.3.5.2. The Company's statutory auditor 32.3.5.3. The borrower's bankers, during interactions with the CRA 32.3.5.4. Debenture Trustees Cases where there are deviations to the checklist shall be documented by the auditor as part of the audit report submitted to the board. 32.3.6. Review of ratings has been carried out as per the review policy of the CRA. 32.3.7. Dissents, if any, have been recorded for each committee meeting, as stated in the Operations Manual/ Internal governing document. 32.3.8. CRA has complied with the timelines for publication of press release/ rating rat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of the file and the subject of the email shall specify the type of intermediary and the name of the intermediary. For example - "Credit Rating Agency - ABC co. Ltd." 33.4. The file shall contain the following details: Name Address Category Registration No. Designated email id Name of compliance officer 34. Information regarding Grievance Redressal Mechanism: For information of all investors who deal/ invest/ transact in the market, it has now been decided that the information as provided below shall be prominently displayed in the offices of the CRAs: Dear Investor, In case of any grievance / complaint against the Credit Rating Agency: Please contact Compliance Officer of the Credit Rating Agency (Name and Address) / email-id ([email protected]) and Phone No. - 91-XXXXXXXXXX. You may also approach CEO / Partner / Proprietor (Name) / email-id ([email protected]) and Phone No. - 91-XXXXXXXXXX. If not satisfied with the response of the CRA you can lodge your grievances with SEBI at http://scores.gov.in or you may also write to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial conflict of interest, develop an internal code of conduct governing operations and formulate standards of appropriate conduct in the performance of their activities, and ensure to communicate such policies, procedures and code to all concerned; 36.4.2. at all times maintain high standards of integrity in the conduct of their business; 36.4.3. ensure fair treatment of their clients and not discriminate amongst them; 36.4.4. ensure that their personal interest does not, at any time conflict with their duty to their clients and client's interest always takes primacy in their advice, investment decisions and transactions; 36.4.5. make appropriate disclosure to the clients of possible source or potential areas of conflict of interest which would impair their ability to render fair, objective and unbiased services; 36.4.6. endeavor to reduce opportunities for conflict through prescriptive measures such as through information barriers to block or hinder the flow of information from one department/ unit to another, etc.; 36.4.7. place appropriate restrictions on transactions in securities while handling a mandate of issuer or client....
X X X X Extracts X X X X
X X X X Extracts X X X X
....try classification published by Stock Exchanges from time to time. 37.4. Monitoring: Monitoring of implementation of standardized industry classification shall be done in terms of the half-yearly internal audit for CRAs, mandated under Regulation 22 of the SEBI (Credit Rating Agencies) Regulations, 1999 and circulars issued thereunder. 38. Firewall between CRAs and their Affiliates: 38.1. SEBI (Credit Rating Agencies) Regulations, 1999 inter- alia required CRAs to segregate certain activities to a separate entity under Regulation 9(f) of SEBI (Credit Rating Agencies) Regulations, 1999 (hereinafter referred to as "non-rating associate or subsidiary or group entity" or collectively as "non-rating entities"). 38.2. In view of the above, the following measures are mandated to strengthen the firewall between SEBI-registered CRAs and their non-rating entities: 38.2.1. CRAs shall formulate a policy on separation or firewall practices with the non-rating entities and document the same in their internal operational manuals or governing document. Such policy, and revisions thereto, shall be ratified by the Board of Di....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Letter of Representation for Credit Rating Agency Securities and Exchange Board of India Dear Sir, Sub: Surrender of Certificate of Registration as Credit Rating Agency, Registration No. . ____________ 1. We hereby surrender our certificate of registration as Credit Rating Agency. 2. We enclose the original certificate of registration (or indemnity in case the certificate is lost or stolen) for cancellation. 3. We hereby confirm that: • • no complaint /disciplinary proceeding is pending against us; • no investigation / inquiry by SEBI is pending against us with respect to our activities as a Credit Rating Agency; • as on date of application, we have paid all fees; • we shall continue to be liable for all liabilities/obligations (including monetary penalties, if any) for violations, if any, of the provisions of the SEBI Act and the SEBI (Credit Rating Agency) Regulations, 1999 that have taken place before our surrender of certificate of registration; • all our current assignments as a Credit Rating Agency have been eit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... symbols for the categories AA to C. The modifiers reflect the comparative standing within the category. Rating Symbols and Definitions for Short Term Securities Short term securities: The securities with original maturity of up to one year Rating symbols should have CRA's first name as prefix A1 - Securities with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk. A2 - Securities with this rating are considered to have strong degree of safety regarding timely payment of financial obligations. Such securities carry low credit risk. A3 - Securities with this rating are considered to have moderate degree of safety regarding timely payment of financial obligations. Such securities carry higher credit risk as compared to instruments rated in the two higher categories. A4- Securities with this rating are considered to have minimal degree of safety regarding timely payment of financial obligations. Such securities carry very high credit risk and are susceptible to default. D - Securities with this rating are in default or expected to be in default on maturity. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....afety regarding timely payment of financial obligation. Such instruments carry low credit risk. A3 (SO) - Instruments with this rating are considered to have moderate degree of safety regarding timely payment of financial obligation. Such instruments carry higher credit risk as compared to instruments rated in the two higher categories. A4 (SO) - Instruments with this rating are considered to have minimal degree of safety regarding timely payment of financial obligation. Such instruments carry very high credit risk and are susceptible to default. D (SO) - Instruments with this rating are in default or expected to be in default on maturity. Modifier {"+" (plus)} can be used with the rating symbols for the categories A1(SO) to A4(SO). The modifier reflects the comparative standing within the category. Annexure 6 Rating Symbols and Definitions for Long Term Debt Mutual Fund Schemes Long term debt mutual fund schemes: The debt mutual fund schemes that have an original maturity exceeding one year. Rating symbols should have CRA's first name as prefix AAAmfs - Schemes with this rating are considered to have the highest degree of safety regarding timely receipt ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting Rating symbols should have CRA's first name as prefix AAA - Issuers with this rating are considered to have the highest degree of safety regarding timely servicing of debt obligations. Debt exposures to such issuers carry lowest credit risk. AA - Issuers with this rating are considered to have high degree of safety regarding timely servicing of debt obligations. Debt exposures to such issuers carry very low credit risk. A - Issuers with this rating are considered to have adequate degree of safety regarding timely servicing of debt obligations. Debt exposures to such issuers carry low credit risk. BBB - Issuers with this rating are considered to have moderate degree of safety regarding timely servicing of debt obligations. Debt exposures to such issuers carry moderate credit risk. BB - Issuers with this rating are considered to have moderate risk of default regarding timely servicing of debt obligations. B - Issuers with this rating are considered to have high risk of default regarding timely servicing of debt obligations. C - Issuers with this rating are considered to have very high risk of default regarding timely servicing of debt obligations. D - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this rating are considered to have strong degree of safety regarding timely payment of financial obligation. Such securities carry low credit risk. A3 (CE) - Securities with this rating are considered to have moderate degree of safety regarding timely payment of financial obligation. Such securities carry higher credit risk as compared to instruments rated in the two higher categories. A4 (CE) - Securities with this rating are considered to have minimal degree of safety regarding timely payment of financial obligation. Such securities carry very high credit risk and are susceptible to default. D (CE) - Securities with this rating are in default or expected to be in default on maturity. Modifier {"+" (plus)} can be used with the rating symbols for the categories A1 (CE) to A4 (CE). The modifier reflects the comparative standing within the category. Annexure 11 Instrument-wise definition of default Financial Instrument Rating Scale Definition of Default Debentures/Bonds Long Term A delay of 1 day even of 1 rupee (of principal or interest) from the scheduled repayment date. Commercial Paper Short....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; 10. Details of default in payment of principal/interest obligations as on date/ in the month ended , on our listed and unlisted debt obligations, in any of the above cases (if any): Name of the security ISIN Amount to be paid Due Date of Payment Actual Date of Payment Remarks Thanking You, Yours faithfully, Annexure 13 Standard Template for Press Release (Minimum Information be disclosed) Name of the Company Date of Press Release Details of security/ies Name of the security Date of issuance Coupon rate Maturity Date Size of the issue Rating assigned, along with Rating Outlook Rating action (assigned/ upgraded/ downgraded) for the security. Detailed Rationale justifying the Rating Action/ rating assigned. List of key rating drivers for the Rating Action i.e. factors justifying favourable assessment (strengths) and factors constituting risk (weakness). Detailed description....
X X X X Extracts X X X X
X X X X Extracts X X X X
....headroom. Its bank limits are utilized to the extent of 80% and has sought enhancement in bank lines, supported by above unity current ratio. 3. Liquidity: Stretched - Liquidity is marked by tightly matched accruals to repayment obligations, highly utilized bank limits and modest cash balance. 4. Liquidity: Poor - Poor liquidity marked by lower accruals when compared to repayment obligations, fully utilized bank limits and modest cash balance. This could constrain the ability of the company to repay is debt obligations on a timely basis. Annexure 15 Type of Securities / Support Consideration(s) for CE-suffix: 1. Guaranteed bond; Shortfall undertaking backed bond or other such third-party credit enhancement 2. Covered bonds which have to be serviced primarily by the issuer (i.e., primary recourse to issuer), with secondary recourse to the cash flows from the pool of loans housed in a trust 3. Partially guaranteed bond 4. Commercial Mortgage-Backed Securities (CMBS)-like structures 5. Standby Letter of Credit (SBLC) backed securities 6. Debt backed by pledge of shares or other assets 7. Guaranteed Pooled bond issuance (PBI), not through a tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rmation shall be shared on half yearly basis. (ii) Funds transferred to Debenture Redemption Reserve (DRR), depletion of the DRR/invocation of guarantee which could affect the payment of debenture obligations. This information shall be shared annually. (iii) Details of redemption of the issue. (iv) Any default committed including the default in payment of interest or redemption of debentures or delay in creation of security. (v) Any change or restructuring of the terms of the issue. (vi) Periodic reports from lead banks about the progress of the project for which funds have been raised through debentures and certificate from issuer's auditors in respect of utilization of funds. (vii) Details of grievances filed by debenture-holders and action taken to resolve them. (viii) Non-cooperation by the issuer with respect to furnishing required reports/ certificates/ information. Information pertaining to points iii. to viii. above shall be shared as and when available. ANNEXURE 18 Financial sector regulators/ authorities 1. Securities and Exchange Board of India 2. Reserve Bank of India 3. Insurance Regul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Annexure 21 Movement* of Each Credit Rating Upgrades Rating Upgrades between Apr - Sep/ Oct - Mar S. No. Name of the issuer Sector Security Type etc.) Listing Status (Listed / Proposed to be listed) Rating prior to revision Rating post revision Date of Press release for Rating upgrade Notch difference Trigger Event (Quarterly Results, Exchange Disclosures, Annual Surveillance etc.) Downgrades Rating Upgrades between Apr - Sep/ Oct - Mar S. No. Name of the issuer Sector Security Type Listing Status (Listed / Proposed to be listed) Rating prior to revision Rating post revision Date of Press release for Rating upgrade Notch difference Trigger Event (Quarterly Results, Exchange Disclosures, Annual Surveillance etc.) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or Security Type Issue Size (INR millions) Listing Status (Listed/ Proposed to be listed) Rating prior to Default Trigger Event Date of trigger of event/ receiving intimation Date of Default Recognition Rating prior to default - AAA category 1 2 Rating prior to default - AA category 1 2 Rating prior to default - A category 1 2 Rating prior to default - BBB category 1 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; Annexure 25 Sharp rating actions in investment grade rating category (excluding non-cooperative issuers) S. No. Rating action Number of ratings 1. Number of rating downgrades of more than 3 notches 2. Number of downgrades to default from investment grade ratings 3. Number of outstanding ratings as on March 31/ September 30 Long-run average default rates for long term instruments Rating 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 term instruments ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... * If in a particular financial year, a rating has subsequently been changed, then that shall also be disclosed Solicited Credit Ratings assigned to those issuers mentioned in the table above in the last financial year** S. No. Name of the Issuer Rating assigned ** Any subsequent revision of the rating in the same year shall also be disclosed Annexure 29 PRINCIPLES FOR OUTSOURCING FOR CRAs 1. A CRA seeking to outsource activities shall have in place a comprehensive policy to guide the assessment of whether and how those activities can be appropriately outsourced. The Board / partners (as the case may be) {hereinafter referred to as the "the Board"} of the CRA shall have the responsibility for the outsourcing policy and related overall responsibility for activities 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....followed while outsourcing to an unrelated party. 2.3 The records relating to all activities outsourced shall be preserved centrally so that the same is readily accessible for review by the Board of the CRA and / or its senior management, as and when needed. Such records shall be regularly updated and may also form part of the corporate governance review by the management of the CRA. 2.4 Regular reviews by internal or external auditors of the outsourcing policies, risk management system and requirements of the regulator shall be mandated by the Board wherever felt necessary. The CRA shall review 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 inves....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to the materiality of the outsourced activity in relation to the ongoing business of the CRA. 5.2 Care shall be taken to ensure that the outsourcing contract: (a) clearly defines what activities are going to be outsourced, including appropriate service and performance levels; (b) provides for mutual rights, obligations and responsibilities of the CRA and the third party, including 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 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; ....