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SEBI Plan to Widen Credit Rating Agency Scope

10 July 20251 min read
BANKING & FINANCESEBI Plan to WidenCredit RatingAgency Scope10 July 2025safalsetu.com

Why in the news

SEBI proposed to let rating agencies assess more kinds of financial instruments than the listed securities they now cover. The draft was open for public feedback till 30 July 2025.

Key facts

  • CRAs judge a borrower’s ability to repay principal and interest on time and rate its debt instruments; investors use ratings to gauge risk.
  • Present rule: only securities listed, or proposed to be listed, and governed by SEBI regulations.
  • Gap: some sector regulators have issued no guidelines, so the CRA role for unlisted financial instruments is unclear.

Proposal

  • CRAs may rate instruments regulated by other financial sector regulators (RBI, IRDAI, PFRDA).
  • This would hold even if the regulator has issued no detailed CRA guidelines.
  • It would also hold if the instrument is not listed or proposed for listing.

Conditions

  • Fee-based: the CRA earns a professional fee.
  • Non-fund-based: no financing or credit exposure by the CRA.

Exam angle

  • Comment deadline: 30 July 2025.
  • Regulators named: SEBI, RBI, IRDAI, PFRDA (FSRs).
  • Key conditions: fee-based and non-fund-based.

Test yourself

1. SEBI's consultation paper on credit rating agencies invited public comments until which date?

The draft was open for comments until 30 July 2025.

2. Under SEBI's proposal, ratings by CRAs of other regulators' instruments must be which kind?

The conditions are that ratings be fee-based and non-fund-based.

3. Currently, CRAs under SEBI rules may rate only which type of securities?

SEBI rules restrict CRAs to listed or to-be-listed securities.

This topic is part of Daily Current Affairs 10 July 2025 (15 topics).

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