Market regulator Securities and Exchange Board of India (SEBI) on Wednesday made a colour-coded ‘Credit Risk-o-Meter’ mandatory for debt securities, aimed at helping investors assess credit risk before investing.
The requirement will apply to listed and proposed-to-be-listed non-convertible securities, commercial papers, securitised debt instruments, security receipts and market-linked debentures, whether issued publicly or privately.
The meter maps existing credit ratings to six risk levels, ranging from “lowest credit risk” for AAA-rated securities to “high to very high risk of default” for B and below. Short-term ratings from A1+ to A4/D will have a separate version of the meter.
Where a security has ratings from multiple agencies, the meter will reflect the lowest rating. The rating agency and actual rating must be displayed below the meter. Unsecured instruments will have to be identified in bold red text.
If a rating agency marks an issuer as “Issuer Not Cooperating” (INC), the meter will point to a separate grey “INC” zone.