SEBI Updates Guidelines For Credit Agencies To Include Enhanced Disclosures

In a circular released on Tuesday, the Securities and Exchange Board of India (SEBI) has included enhanced guidelines for disclosures made by credit rating agencies (CRAs). CRAs monitor and analyze the relevant factors affecting the creditworthiness of an issuer. The regulator now wants these agencies to incorporate relevant factors in their press release about the ratings so as to help investors make an informed decision.

The cicular said, "in order enable investors to understand underlying rating drivers better and make more informed investment decisions, CRAs shall make the following specific disclosures in the section on 'Analytical Approach' in the Press Release:

a. When a rating factors in support from a Parent/Group/Government, with an expectation of infusion of funds towards timely debt servicing, the name of such entities, along with rationale for such expectation, may be provided.

b. When subsidiaries or group companies are consolidated to arrive at a rating, list of all such companies are consolidated to arrive at a rating, list of all such companies, along with the extent (e.g. full, proportionate or moderate) and rationale of consolidation, may be provided."

The circular further said that the press release should include a section on "liquidity," highlighting liquid coverage ratio, adequacy of cash flows for servicing maturing debt obligation, etc and any linkage to external support for meeting any near-term maturing obligations.

SEBI has also directed the agencies to include information on previous rating performance. Historical average rating transition rates across various rating categories are to be published. You can refer the complete updated guidelines from SEBI here.