The Securities and Exchange Board of India on 31st October 2022, notified the guidelines with regard to rating scales used by Credit Rating Agencies (CRA). The circular shall be applicable with effect from January 1, 2023, and CRAs shall report on their compliance with the same (as ratified by their respective board of directors) to SEBI within one quarter from the specified date of applicability
Issuer rating / Corporate Credit Rating indicates the degree of safety of the issuer or the rated entity with regard to timely servicing of all its debt obligations. Pursuant to the consultation with the CRAs, standardised symbols and their definitions have been devised for Issuer Rating / Corporate Credit Rating. The new symbols and definitions as notified in these guidelines shall henceforth be used for the new ratings/ reviews by the CRAs for Issuer Rating / Corporate Credit Rating.
A ‘rating outlook’ indicates CRA’s view on the expected direction of the rating movement in the near to medium term, whereas a ‘rating watch’ indicates a CRA’s view on the expected direction of the rating movement in the short term.
SEBI in its earlier notification, mandated the CRAs to frame detailed guidelines on policy for placing ratings on credit watch. The circular also mandates each CRA to assign a rating outlook and disclose the same in the press release.