The Securities and Exchange Board of India on 25th August 2022, has enhanced the disclosure norms for credit rating agencies (CRA) in order to allow investors and other stakeholders to properly use disclosures in a fair assessment of CRAs.
The enhanced norms shall be applicable to credit ratings of securities that are listed, or proposed to be listed, on a recognized stock exchange, and other credit ratings that are required under various SEBI Regulations or circulars thereunder.
In order to standardize the methodology of computation and disclosure of a ‘sharp rating action’, it is clarified that CRAs shall compare two consecutive rating actions.Therefore, a CRA shall disclose a sharp rating action, if the rating change between two consecutive rating actions is more than or equal to 3 notches downward. In other words, if the difference in credit rating between two consecutive press releases is more than or equal to 3 notches downward, the same has to be included in the disclosure on sharp rating actions.
In addition to the current disclosures of sharp rating actions excluding noncooperative issuers, CRAs shall also separately disclose sharp rating actions including such actions on non-cooperative issuers.
CRAs shall follow a uniform practice of three consecutive months of non-submission of No-default Statement (NDS) (or inability to validate timely debt servicing through other sources) as a ground for considering migrating the ratings to INC and shall tag such ratings as INC within a period of 7 days of three consecutive months of non-submission of NDS. The CRA in its judgement may migrate a rating to the INC category before the expiry of three consecutive months of non-receipt of NDS.
CRAs shall also formulate a policy on “Minimum/ Indicative Information requirement” in terms of various sectors or types of ratings (referred at Section III above), etc. and disclose it on their website.
