On 31-10-2022, Securities and Exchange Board of India (‘SEBI’) issued circular regarding standardization of rating scales used by Credit Rating Agencies (‘CRA’s) to standardize the usage of rating scales. The circular is effective from 01-01-2023 and CRA’s are required to report on compliance to SEBI within one quarter from the specified date of applicability.
Key Points-
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New standardized symbols and their definitions have been devised for issuer rating/ corporate credit rating;
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Standard descriptors to be used when an issuer/security is placed on “Rating watch” with positive implications; Developing Implications or Negative Implications.
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Standard descriptors to be used when issuer/security is placed on ‘Rating Outlook’: Stable; Positive; Negative.
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Usage of rating scales (i.e., symbols and definitions) for ‘structured finance (SO)’ instruments.