Master Circular for Credit Rating Agencies

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....f the existing circulars as on May 16, 2024, 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 Accordingly, the list of existing circulars for CRAs which have been superseded by this master Circular is placed at Annexure A. IV. Notwithstanding such rescission- a. anything done or any action taken or purported to have been done or taken under the rescinded circulars, prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular; b. any application made to the Board under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of these regulations; V. This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 to promote the development of, and to regulate, the securities market. VI. This issues with th....

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....à¤°à¤¤à¤¿à¤­à¥‚ति और विनिमय बोर्ड Securities and Exchange Board of India 25. Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2018:. Chapter III: REPORTING AND DISCLOSURES.. 26. Probability of Default Benchmark.. 27. Periodic Disclosures 28. Continuous Disclosures, Reporting and Timelines.…..... 40 .42 42 44 50 29. Periodical report to be submitted to SEBI: 54 30. Other Continuous Disclosures:. .54 31. Guidelines on manner of disclosures by CRAS on its website:.. 55 Chapter IV: INTERNAL AUDIT FOR CRAS. .56 32. Internal Audit for CRAs:........... 56 33. Requirements related to Internal Audit of CRAS: 56 Chapter V : MISCELLANEOUS ........... -------------- 34. Designated e-mail ID for regulatory communication with SEBI:... 60 35. 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:. 36. Guidelines on Outsourcing of Activities by CRAS .60 61 37. ....

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..... Whether any application was made in the past to SEBI seeking registration in any capacity but it was not granted? If yes, details thereof. 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 e....

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....ssed by SEBI ("the Order”), if any: 4.1.1. On and from the date 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; Page 7 of 105 S3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 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-....

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.... CRA wishes to 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. Page 9 of 105 5331 भारतीय प्रतिभूति और विà....

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....¯ 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 finance (SO)' instruments as prescribed at Annexure 4-5. 5.1.5. For ex....

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....ated with infrastructure sector to begin with: Page 12 of 105 53| 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 high expected loss, over the life of the instrument Instruments rated “EL 7” are considered to have highest expected loss, over the life of the instrument 5.6.2. For existing outstanding rat....

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....nexure 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 Page 14 of 105 5331 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India terms of their inter-linkages, holding company's liquidity, financial flexibility and support to the subsidiaries, etc. 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 mandated to have in place a proper rating process and disclose the same on their website. 8.2. Each CRA shall frame detailed guidelines on the following, include them in its Operations Manual/ Internal governing document and disclose the same on its w....

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.... 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 Page 16 of 105 S3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India India Act, 1992 and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 9. Monitoring and Review of Ratings 9.1. Monitoring of repayment schedules 9.1.1. CRAS have to be proactive in early detection of defaults/ delays in making payments. In this regard, CRAS are required to track the servicing of debt obligations for each security rated by them, ISIN-wise, ....

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....r. 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 the Issuer to explicitly confirm to the CRA that it has not delayed on any payment of interest/ principal in the previous month. 9.3.3. In case there have been delays in the payment of interest/ principal by the Issuer, the Issuers shall state the same in this statement and the CRA shall promptly conduct a rating review and disseminate the rating action through Press Release within 2 days of receipt of such statement. Page 18 of 105 S3 भारत....

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....: 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 suitably incorporated in the press release regarding the rating action. 10.1.8. In order to enable investors to understand underlying rating drivers better and make more informed investment decisions, CRAS shall make the following specific disclosures in the section on "Analytical Approach" in the Press Release: 10.1.8.1. When a rating factors in support from a Parent/Group/ Government, with an expectation of infusion of funds towards timely debt servicing, the name of such entities, along with rationale for such expectation, ma....

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....ements 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. Page 21 of 105 S3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 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 Regulations, the CRA shall continue to review the security, on an ongoing basis throughout the security's lifetime, on the basis of best available information, in accordance with the rating process and policies set forth in its Operations Manual/ Internal governing document. 11.2. CRAS shall have a detailed policy in this respect which shall include the following: 11.2.1. Non-submission of material informati....

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....issuers to various stakeholders, market participants and investors, the following is being prescribed: 11.6.1. A CRA shall disclose two lists of issuers who are non-cooperative with the CRA, separately for: 11.6.1.1. Securities that are listed, or proposed to be listed, on a recognized stock exchange, and 11.6.1.2. Other ratings 11.6.2. The aforementioned lists shall be disclosed in the following format: S. No. Name of Non- Date of categorization of Link to the webpage cooperative issuer issuer as cooperative non-hosting the issuer's press releases 11.6.3. The above disclosure shall be updated on a daily basis. Page 23 of 105 53 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 11.7. 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: 11.7.1. Date of Press Release 11.7.2. Details of security 11.7.3. Rating Action and Indicative/updated rating based on best available information 11.7.4. A....

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....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 security At the time of withdrawal of any credit rating 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, the CRA shall assign a rating to such security and issue a press release as per the format prescribed in the Annexure 13. However, in cases where there are no outstanding obligations under the security rated by the CRA or the company whose security is rated is wound up or merged or amalgamated with another company, CRA shall not assign any rating. Further, the Press Release shall also mention the reason(s) for withdrawal. 12.3. Withdrawal 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: 12.3.1. rated the security continuously for 5 years or 50 per cent of the tenure of the Page 25 of 105 S3 भा....

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....ived 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 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 ....

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....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 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 SE....

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.... 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 to the investors. 14.5.2. CRAS shall undertake independent examination of financial strength of the support provider to....

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....¤°à¤¤à¥€à¤¯ प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 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....

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....ll have an additional clause stating that — - Page 34 of 105 5331 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India "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 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 ....

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....A shall ensure: Page 36 of 105 5331 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 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, 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 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/....

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...., 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. Page 38 of 105 S3 Securities and 5331 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India b. All employees of CRA including the Access Persons shall submit the following details to the CEO/Compliance Officer, as the case may be: 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 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 t....

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.... same day as the day of rating revisions, on either the generic email ID being used for regulatory purposes, or email IDs/URL as may be communicated for this purpose by DTs. 25. Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2018: 1 Circular No. SEBI/HO/DDHS/DDHS-POD2/P/CIR/2023/ 151 dated September 04, 2023 Page 40 of 105 5331 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Vide Gazette Notification No. SEBI/LAD-NRO/GN/2018/36 dated September 11, 2018, in respect of Securities and Exchange Board of India (Credit Rating Agencies) (Second Amendment) Regulations, 2018, as laid down under Regulation 9(f) of SEBI (Credit Rating Agencies) (Second Amendment) Regulations, 2018, a CRA may undertake the rating of financial instruments under the respective guidelines of the financial sector regulators/ authorities as specified in Annexure 19. CRAS may also undertake research activities, incidental to rating, such as research for Economy, Industries and Companies. 25A. Guidelines....

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.... wherever required. 26.2.4. The same may be adjusted for rating withdrawals. For securities, the 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. 26.2.5. Ratings of non-cooperative issuers shall be included in the cohort under the rating category in which the instrument is currently being rated. Page 42 of 105 5-3 | भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 26.2.6. The PD benchmark for the rating categories AAA, AA and A shall be as under, subject to any unexpected legal events/ mitigating circumstances impacting the default rates, with certain permitted tolerance levels: 26.2.6.1. 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%. 26.2.6.2. For AA: a. Zero for 1-year default rate. b. Zero for 2-year default rate with a tolerance level of 2%. 26.2.6.3. For A: a. Zero for 1-year default rate with a tolerance level of 3%. 26.2.7. For ratings on non....

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....: The following disclosures shall be prepared and disclosed for ratings of securities: 27.3.1.1. A Rating Summary Sheet presenting a snapshot of the rating actions carried out during the half-year shall be uploaded by the CRAS on their websites, in the format specified at Annexure 20. The disclosure in the "Rating Distribution for outstanding ratings as on 31st March/30th September" section of Annexure 20 shall also include number of INC ratings outstanding in each category also. 27.3.1.2. Details of new credit ratings assigned during last six-months (Annexure 21). 27.3.1.3. Movement of credit rating of all outstanding securities during the last six-months: a. Movement of each credit rating (Annexure 22), b. Movement of each credit rating from investment grade to noninvestment grade and vice versa (Annexure 23) and Page 44 of 105 5=31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 27.3.1.4. The history of credit rating of all outstanding securities (Annexure 24). 27.3.1.5. On half yearly basis, the list of defaults ....

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....he end of each financial year (March): 27.4.1. Computation and disclosure of Default Rates 27.4.1.1. 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. 27.4.1.2. The cumulative default rates(CDR) shall be calculated in the following manner: a. CDR shall be calculated issuer-wise using the Marginal Default Rate (MDR) approach, using monthly static pools. b. The above may be adjusted for rating withdrawals. 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 incl....

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....­à¤¾à¤°à¤¤à¥€à¤¯ प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 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. 27.4.2. Disclosure of Average Rating Transition Rates for long-term Instruments 27.4.2.1. 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 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. 27.4.2.2. CRAS shall publish their average one-year rating transition rate over a 5-year period, on t....

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....s 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 Page 49 of 105 S3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India pools. 27.4.3.4. In the disclosure at para 27.4.3.3 (b) above, a CRA shall include an additional column to indicate the proportion of ratings that were withdrawn during the financial year. 27.4.3.5. The disclosures under paragraph 27.4.3 shall be applicable for Financial year 2022-2023 27.4.4. Income: A CRA sha....

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.... disseminate information on ratings promptly through press releases as per requirements of Regulation 15 and 16 of SEBI (CRA) Regulations, following is clarified: 28.3.2. Initial Rating Scenario Communication of the rating assigned to issuer Acceptance of Rating or request for review/appeal of Rating by the Issuer Disclosure of rating as non-accepted Rating Dissemination of Press Release on CRA's website and intimation of same to Stock Exchange/Debenture Trustee 28.3.3. Periodic Surveillance Timelines - immediately but not later than 2 working days of rating committee meeting 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 Page 51 of 105 S3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Scenario Dissemination of Press Release on CRA's website and intimation of sam....

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....g uen acce sted I of ons) ept d/pro was t pted for a the anc pose acce асс by review disclo D d to pted ept the /appea sed be by anc issu unacc listed the e of er subse epted ) issue fina quent rating r, | subs rati eque ng to disclo sure d by was grante nt to ass of CRA. the ign unacc non- ed epted acce rating pted ? ratin gs discl osur e? 28.6. 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. 28.7. Disclosure of guidelines for dealing with Conflict of Interest: Page 53 of 105 5331 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India The policies adopted by the CRAS for effective....

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....CO Code of Conduct A CRA shall disclose the compliance status of each provision of IOSCO code of conduct. 31. Guidelines on manner of disclosures by CRAS on its website: 31.1. In order to facilitate enhanced transparency and usability of disclosures made by CRAS on their websites, the following is directed: 31.1.1. Disclosures required by CRAS on their websites under various SEBI circulars should be provided in excel / machine readable format. 31.1.2. 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. 31.1.3. 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. 31.1.4. The provisions under para 31.1.1 to 31.1.2 shall be applicable for Website Disclosures made after March 31, 2023. Page 55 of 105 531 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and ....

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....tation of Internal Auditors: An auditor shall be appointed for a maximum term of five years, with a cooling-off period of two years. 33.3. Scope of the Internal Audit: The scope of the internal audit shall be expanded to include the following additional checks: 33.3.1. CRA and its employees, who are associated directly or indirectly with the rating business, have complied with the regulations and code of conduct. 33.3.2. CRA has defined processes for operations that have been followed during the rating exercise. 33.3.3. 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 33.3.4. Policy in respect of non-cooperation by the issuer, including procedures to be followed for the same, have been complied with. 33.3.5. 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: 33.3.5....

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....¿à¤¨à¤¿à¤®à¤¯ बोर्ड Securities and Exchange Board of India Sr. No. Observatio ns of the auditor Remarks the by Compliance Officer Page 59 of 105 Comments of the Board of the CRA Corrective actions taken 5=31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Chapter V: MISCELLANEOUS 34. Designated e-mail ID for regulatory communication with SEBI: 34.1. 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. 34.2. 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. 34.3. The name of the file and the subject of the email shall speci....

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.... 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. 37.2. 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. 37.3. 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. 37.4. CRAS and their associated persons shall: Page 61 of 105 531 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 37.4.1. lay down, with active involvement of senior ma....

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.... of this circular periodically. 37.6. 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 38. Standardization of industry classification- Applicability to CRAS 38.1. 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. 38.2. 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 research for Economy, Industries and Companies etc. 38.3. Further, as the standardized industry cl....

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....sclosure 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. 39.2.3. 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. Page 64 of 105 5=31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India 39.2.4. 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 39.2.5. 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. 39.2.6. Monitoring: Monitoring of the provisions under para 39 shall be done in terms of the half-yearly internal audit for CRAS, mandated under Regulation 22 of the SEBI (Credit Rating Agencies) ....

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....*We hereby request SEBI to dispense with the procedure laid down in Regulation 16(1) of the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 while processing our request for surrender of certificate of registration. Thanking you, Yours faithfully, Name: (Whole time/Managing Director/Principal Officer) * Please strike off, if not applicable. Page 67 of 105 5=31 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 t....

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....er reflects the comparative standing within the category. Page 69 of 105 at 5-3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Annexure 4 Rating Symbols and Definitions for Long 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 ....

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....ूति और विनिमय बोर्ड Securities and Exchange Board of India 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 of payments from the investments that they have made. AAmfs - Schemes with this rating are considered to have the high degree of safety regarding timely receipt of payments from the investments that they have made. Amfs - 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 ha....

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....red 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 - Issuers with this rating are in default or are expected to be in default soon. Modifiers {"+" (plus) / "-"(minus)} can be used with the rating symbols for the categories AA to C. The modifiers reflect the comparative standing within the category. Page 74 of 105 5=31 भारतीय पà¥....

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....yment of financial obligation. Such securities carry lowest credit risk. A2 (CE) - Securities with 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. Page 76 of 105 5-31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Instr....

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....cial institutions and any over overdraws beyond what is sanctioned by the bank, beyond 30 days as on date/in the month ended , in any of the above case (if any). Page 78 of 105 531 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Na me Nature of Date of obligation default of Lende r Curre nt defaul t Amount Actual Date Remark to be of Payment S paid any) amount 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 ISIN security Amount to be paid Due Date of Payment Actual Date Remarks of Payment Thanking You, Yours faithfully, Page 79 of 105 5-3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Annexure 13 Standard Template for Press Release (Minimum Information be disclosed) Name of the Company Date of Press Release....

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....ment obligations and liquid investments to the tune of Rs.xxx Crore. With a gearing of xx times as of March 31, xxxx, the issuer has sufficient gearing headroom, to raise additional debt for its capex. Its unutilized bank lines are more than adequate to meet its incremental working capital needs over the next one year. 2. Liquidity: Adequate - Adequate liquidity characterized by sufficient cushion in accruals vis- à-vis repayment obligations and moderate cash balance of Rs.xx Crore. Its capex requirements are modular and expected to be funded using debt of Rs.xx Crore for which it has sufficient 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. Page 82 of 105 531 भारती....

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....तिभूति और विनिमय बोर्ड Securities and Exchange Board of India Annexure 17 Sharing of information between Debenture Trustees (DTs) and CRAS A. i. ii. Information from CRAs to DTS Rating assigned/revised for debt securities along with the rationale for the same. Press release, outstanding ratings etc. in respect of debt securities. iii. Non-cooperation by the issuers with respect to sharing necessary information for monitoring the credit quality of the rated instrument with CRAS. iv. Press release and separate communication to DT on withdrawal of rating post redemption of entire amount due towards debenture-holders. V. Default of any type committed by the issuer. B. Information from DTs to CRAS İ. Whether the asset in respect of which security has been created is free from any encumbrance and adequate to ensure asset cover for the debentures or if there is any breach of the terms of creation of the security. This information shall be shared on half yearly basis. ii. Funds transferred to Debenture Redemption Reserve (DRR), depletion of the DRR/invocation of guarantee which could affec....

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....r in surveillance cases Ratings wherein request of review/appeal by the Issuer Rating that have undergone revision post request of review/appeal by Issuer 6. Ratings Withdrawn 7. Rating Distribution for outstanding ratings as on 31st March/ 30th September f 10000445 a AAA b AA C A d BBB e BB B g h UD C Page 88 of 105 ANNEXURE 20 No. of ratings Amount rated (INR millions) of debt 5-3 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Details of new credit ratings assigned during last six-months New Ratings assigned between Apr - Sep/Oct - Mar Sector Securities Issue Na me etc.) of the Issu er Whether review/appea Annexure 21 Listing Wheth Type etc.) Size Status (INR (Listed/ million Propose s) d to be er the issuer reque sted Rating assign Final Rating I of the rating ed Assign listed) for a review /appe al of rating was granted by CRA. t for review /appea I by the issuer prior to ed reques S N .Zo ? Page 89 of 105 5-31 भारतीय प्रतिभूति औ....

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.... of isio er 3r 3r e vis io e DFW DOROSSO Curr at ent Outs tand ing Rati ng Page 92 of 105 n 5-31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Annexure 25 List of Defaults Separately for Each Rating Category (on half-yearly basis) Long Term Scale Listing Status Date of trigger of Date Issue of S Name (Listed Rating Trigge event/ Size Defa of the Securit prior to r receivin (INR ult N Issuer Sector y Propo Default Eve g millio Rec Туре sed to nt intimati ns) ogni be on tion listed) Rating prior to default - AAA category 2 2 2 1 1 1 2 Rating prior to default - AA category Rating prior to default - A category Rating prior to default - BBB category Rating prior to default - BB category Rating prior to default – B category 1 Rating prior to default – C category Short Term Scale Page 93 of 105 SNO 5=31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Ex....

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....¤°à¤¤à¥€à¤¯ प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India S. No. Name of the Issuer Unsolicited Credit rating* Annexure 29 Financial Year Rating assigned Financial Year Financial Year 1 2 3 * 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 Page 98 of 105 5-31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India Annexure 30 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 referr....

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.... of the CRA to act as the third party, systems shall be put in place to have an arm's length distance between the CRA and the third party in terms of infrastructure, manpower, decision-making, record keeping, etc. for avoidance of potential conflict of interests. Necessary disclosures in this regard shall be made as part of the contractual agreement. It shall be kept in mind that the risk management practices expected to be adopted by the CRA while outsourcing to a related party or an associate would be identical to those 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 Page 100 of 105 5=31 भारतीय पà¥....

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....prospective third party's business reputation and track record of their services rendered in the past; d) level of concentration of the outsourced arrangements with a single third party; and e) the environment of the foreign country where the third party is located. 5. Outsourcing relationships shall be governed by written contracts / agreements / terms and conditions (as deemed appropriate) {hereinafter referred to as “contract"} that clearly describe all material aspects of the outsourcing arrangement, including the rights, responsibilities and expectations of the parties to the contract, client confidentiality issues, termination procedures, etc. 5.1 Outsourcing arrangements shall be governed by a clearly defined and legally binding written contract between the CRA and each of the third parties, the nature and detail of which shall be appropriate 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 responsib....

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....ss all books, records and information relevant to the outsourced activity with the third party. 6. The CRA and its third parties shall establish and maintain contingency plans, including a plan for disaster recovery and periodic testing of Page 103 of 105 5=31 भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India backup facilities. 6.1 Specific contingency plans shall be separately developed for each outsourcing arrangement, as is done in individual business lines. 6.2 CRA shall take appropriate steps to assess and address the potential consequence of a business disruption or other problems at the third party level. Notably, it shall consider contingency plans at the third party; co- ordination of contingency plans at both the CRA and the third party; and contingency plans of the CRA in the event of non-performance by the third party. 6.3 To ensure business continuity, robust information technology security is a necessity. A breakdown in the IT capacity may impair the ability of the CRA to fulfill its obligations to other ....