SEBI Report; Dated: 09.07.2025
The Securities and Exchange Board of India (SEBI) has issued a consultation paper outlining proposed regulatory changes for Credit Rating Agencies (CRAs). The proposals aim to expand the functional scope of CRAs while ensuring continued regulatory oversight and investor protection.
1. Current Restrictions Under CRA Regulations
As per the existing CRA Regulations, CRAs are restricted from engaging in any activity other than:
- Rating of securities, and
- Only those securities that are either listed or proposed to be listed on a SEBI-recognised stock exchange.
This limitation was primarily put in place to avoid potential conflicts of interest and to ensure the integrity of the rating process within capital markets.
2. Proposed Expansion in Scope of CRA Activities
In the consultation paper, SEBI has proposed two key relaxations:
Permission to Rate Financial Products Regulated by Other Regulators
CRAs may be allowed to rate financial instruments that fall under the purview of other financial sector regulators (e.g., RBI, IRDAI, PFRDA), even if they are not listed or proposed to be listed.
Rating of Unlisted Securities Without Specific Guidelines
- CRAs may be permitted to rate unlisted securities even if there are no existing SEBI or other regulator-issued guidelines related to rating such instruments.
- This would expand access to ratings for entities and instruments currently outside the formal rating regime.
3. Regulatory Safeguards and Oversight
While proposing a broader scope for CRAs, SEBI is expected to frame necessary checks and disclosures to:
- Prevent conflict of interest,
- Ensure transparency and consistency in ratings methodology, and
- Safeguard the interests of investors and market participants.
4. Way Forward
SEBI has invited public comments on the proposals mentioned in the consultation paper. The feedback received will help SEBI finalise amendments to the CRA Regulations, which may reshape the regulatory framework for credit rating activities in India.
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