Market regulator Sebi issues guidelines to standardise CRAs' rating scales

The Securities and Exchange Board of India (Sebi) on Monday issued new guidelines to standardise rating scales used by Credit Rating Agencies (CRAs) that will come into effect from January 1, 2023.

“Standardised symbols and their definitions have been devised for issuer rating or corporate credit rating,” said Sebi in its circular. The regulator has directed that rating symbols should have CRA’s first name as prefix. The regulator also specified standard descriptors for ‘rating watch’ and ‘rating outlook’.

CRAs will have to use descriptors like rating watch with positive implications, developing implications, or negative implications. Meanwhile, for any issuer or security placed in rating outlook, CRAs will have to use stable, positive, and negative as standard descriptors. Rating outlook indicates the near-to-medium term rating movement while ‘rating watch’ indicates CRA’s view in the short term.