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    Home»Regulations & Policy»Credit Rating Agencies Regulation: SEBI Considers Expanding…
    Regulations & Policy

    Credit Rating Agencies Regulation: SEBI Considers Expanding…

    Kingsman | Financial AdvisorBy Kingsman | Financial AdvisorJuly 9, 2025No Comments2 Mins Read
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    SEBI Considers Allowing CRAs to Rate Instruments Beyond its Regulatory Scope

    SEBI, the markets watchdog, is contemplating a significant shift by proposing to permit credit rating firms (CRAs) to evaluate financial instruments falling under the jurisdiction of other financial sector regulators. This move, if implemented, would mark a departure from the current regulatory framework that limits CRAs to rating only securities listed on Sebi-recognized stock exchanges.

    Expanding the Rating Horizon

    Under the current regulations, CRAs are restricted to rating instruments that are either listed or intended for listing on Sebi-approved exchanges. However, Sebi’s recent consultation paper suggests a potential expansion of CRAs’ scope beyond its regulatory purview under certain conditions.

    New Regulatory Framework

    The proposal outlines that CRAs could rate financial instruments governed by other Financial Sector Regulators (FSRs) as long as they adhere to the regulatory framework specified by the respective FSRs. This includes compliance with guidelines related to policy, risk management, and investor complaint resolution, among others.

    Operational Guidelines

    Should this proposal materialize, CRAs would be restricted to fee-based and non-fund-based activities conducted through Separate Business Units (SBUs) segregated from Sebi-regulated functions by a Chinese Wall. These SBUs must establish distinct grievance redressal mechanisms and maintain separate records for non-Sebi-regulated activities.

    Ensuring Transparency and Disclosure

    Furthermore, CRAs undertaking non-Sebi-regulated activities must ensure transparent disclosure on their websites regarding such operations. Stakeholders engaging with CRAs for these activities need to acknowledge the absence of Sebi’s investor protection mechanisms, emphasizing the need for informed consent.

    Compliance and Reporting

    CRAs are required to submit compliance reports to Sebi within six months of the proposal notification, detailing their adherence to the new guidelines. Additionally, half-yearly internal audit reports must include undertakings confirming compliance with the specified requirements.

    Public Feedback and Industry Response

    Sebi has invited public comments on this proposal until July 30, 2025, following requests from industry participants seeking broader rating capabilities for CRAs. The proposed changes aim to align CRAs’ rating activities with market demands and operational efficiencies.

    This potential regulatory shift signifies a significant evolution in the credit rating landscape, offering CRAs the opportunity to diversify their rating portfolios and cater to a broader spectrum of financial instruments.

    author avatar
    Kingsman | Financial Advisor
    Kingsman a 35-year-old financial advisor from London, UK, epitomizes the blend of analytical prowess and personable guidance. With a decade of experience in the financial sector, Kingsman has cultivated a reputation for his strategic approach to wealth management and investment advising. His journey began at the University of Oxford, where he graduated with honours in Economics, a discipline that fueled his fascination with the financial markets and their intricacies.
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    Kingsman a 35-year-old financial advisor from London, UK, epitomizes the blend of analytical prowess and personable guidance. With a decade of experience in the financial sector, Kingsman has cultivated a reputation for his strategic approach to wealth management and investment advising. His journey began at the University of Oxford, where he graduated with honours in Economics, a discipline that fueled his fascination with the financial markets and their intricacies.

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