ARTICLE
7 September 2024

Credit Rating Agencies

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SEBI, vide circular dated July 4, 2024, has revised the timelines to be followed by Credit Rating Agencies ("CRAs") as specified under master circular dated May 16, 2024.
India Finance and Banking

Revised timelines and disclosures by credit rating agencies

SEBI, vide  circular dated July 4, 2024, has revised the timelines to be followed by Credit Rating Agencies (“CRAs”) as specified under master circular dated May 16, 2024. The revised timelines are as follows:

  1. for communication of rating to the issuer – 1 (one) working day of the rating committee meeting;
  2. for request for review/appeal of rating by the issuer – 3 (three) working days of the rating committee meeting; and
  3. for dissemination of press release on CRA's website and intimation of the same to stock exchange/ debenture trustee – 7 (seven) working days of the rating committee meeting.

Further, CRAs must maintain an archive of all disclosures on their website, for at least 10 (ten) years.

Amendment of the term ‘liquid asset' under the SEBI (CRAs) Regulations, 1999

SEBI, vide  notification dated July 8, 2024, has issued the SEBI (CRAs) (Amendment) Regulations, 2024 amending the term ‘liquid asset' to include units of overnight or liquid mutual fund schemes, fixed deposits of scheduled commercial banks, and repo on corporate bonds. Pursuant to this, the term ‘liquid asset' means a low risk asset such as cash, units of overnight or liquid mutual fund schemes, fixed deposits of scheduled commercial banks, government securities, treasury bills, repo on government securities and repo on corporate bonds that may be easily converted into cash in a short period of time.

Eligible CRAs for capital adequacy purposes under Basel III Capital Regulations

RBI, vide  notification dated July 10, 2024, has permitted banks to use the ratings of CRA i.e. Brickwork Ratings India Private Limited (“Permitted CRA”) for risk weighting their claims for capital adequacy purposes, subject to the following:

  1. in respect of fresh rating mandates, rating may be obtained from the Permitted CRA for bank loans not exceeding INR 250,00,00,000 (Indian Rupees two hundred fifty crore); and
  2. in respect of existing ratings, the Permitted CRA may undertake rating surveillance irrespective of the rated amount, till the residual tenure of such loans.

Provided that in case of existing ratings assigned to working capital facilities exceeding INR 250,00,00,000 (Indian Rupees two hundred and fifty crore), the Permitted CRA must undertake rating surveillance only till the next renewal of such facility by the banks.

Credit Rating Agencies at the international financial services centres

SEBI, vide  its circular dated July 19, 2024, has added the International Financial Services Centres Authority (“IFSCA”) to the list of financial sector regulators/authorities as provided under Annexure 19 of the Master circular for CRAs dated May 16, 2024, enabling CRAs registered with SEBI to undertake rating activities at International Financial Services Centres (“IFSCs”) and further clarified that any issues arising from the activities of CRAs under the guidelines of IFSCA will be dealt by IFSCA including but not limited to complaints, enforcement actions and furnishing of information to the third parties.

IFSCA, on July 25, 2024, has also issued a circular in this regard providing that credit rating agencies registered with SEBI are now permitted to undertake credit rating activities in the IFSC.

Valuation of assets of schemes at international financial services centres

IFSCA, on July 25, 2024, has issued a circular regarding the valuation of assets of schemes under IFSCA (Fund Management) Regulations, 2022 at IFSCs. A CRA which has obtained a certificate of registration from the IFSCA under the IFSCA (Capital Market Intermediaries) Regulations, 2021 may also undertake the valuation of assets of the schemes under IFSCA (Fund Management) Regulations, 2022.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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