Capital Markets: Challenges and Developments

SEBI tightens rules for provisional debt rating


From UPSC perspective, the following things are important :

Prelims level : SEBI

Mains level : Paper 3- Regulation of credit rating agencies

New framework for debt instrument

  • The new framework requires that a rating will be considered provisional in cases where certain compliances that are crucial to the assignment of credit rating are yet to be complied with at the time of rating.
  • Under the new framework, all provisional ratings (‘long term’ or ‘short term’) for debt instruments need to be prefixed as ‘provisional’ before the rating symbol.
  • In no case shall a rating, including provisional rating, be assigned by a credit rating agency for an issuer or client evaluating strategic decisions such as funding mix for a project, acquisition, debt restructuring, scenario-analysis in loan refinancing,” SEBI said.
  • On validity period, SEBI said provisional rating will be converted into a final rating within 90 days from the date of issuance of the instrument.
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