SEBI Unveils New Operational Guidelines for Credit Rating Agencies

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SEBI Unveils New Operational Guidelines for Credit Rating Agencies
06 Jul 2024
5 min read

News Synopsis

The Securities and Exchange Board of India (SEBI), the nation's market regulator, has implemented a new set of guidelines aimed at streamlining operations and improving the ease of doing business for credit rating agencies (CRAs) in India. These modifications come into effect on August 1, 2024.

Faster Communication and Appeal Process

A key aspect of the new guidelines is the introduction of specific timelines for communication and appeals related to credit ratings. Here's a breakdown of the changes:

  • Faster Communication: CRAs are now obligated to inform companies about their credit ratings within one working day of the rating committee meeting. This ensures companies receive timely updates on their creditworthiness.

  • Streamlined Appeals: Companies will have three working days to request a review or appeal a rating decision. This defined timeframe allows for a swift and efficient appeals process.

  • Timely Disclosures: Dissemination of the press release on the CRA's website and notification to the stock exchange or debenture trustee must be completed within seven working days of the rating committee meeting. This ensures stakeholders are promptly informed about any rating actions.

Enhanced Transparency and Record Keeping

The new guidelines also emphasize transparency and record-keeping for CRAs:

  • Maintaining Records: CRAs are mandated to maintain all records associated with the aforementioned disclosures for a period of 10 years. These records can be shared with debenture trustees upon request.

  • Website Transparency: CRAs must continue to make relevant disclosures readily available on their websites. This information should be accessible under the issuer-specific press releases/rating rationale section for the respective issuer.

Time-Bound Disclosures for Specific Cases

Securities and Exchange Board of India (SEBI), has outlined specific timelines for certain types of disclosures:

  • Non-Cooperative Issuers: To keep stakeholders informed, CRAs are required to update a list of non-cooperative issuers on a daily basis. This list identifies companies that have not cooperated with the rating process.

  • Unaccepted Ratings: When an issuer disagrees with a rating, CRAs must maintain information about such ratings for a period of 12 months. This allows for proper documentation and potential future reference.

Ensuring Compliance and Market Development

SEBI will monitor compliance with these new guidelines through the half-yearly internal audits conducted for credit rating agencies. These measures aim to:

  • Protect Investors: Timely and accurate credit ratings are crucial for informed investment decisions.

  • Develop the Securities Market: Streamlined operations for CRAs contribute to a more efficient and well-functioning securities market in India.

Conclusion

SEBI's new guidelines represent a significant step towards improving the operational efficiency and transparency of credit rating agencies in India. By establishing clear timelines and robust record-keeping requirements, SEBI aims to enhance the credibility and reliability of the rating process, ultimately benefiting all stakeholders in the securities market.

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