Sebi proposes new rating system for infrastructure projects
The Securities and Exchange Board of India (Sebi) has envisaged a new rating system for projects and instruments associated with infrastructure sector to begin with.
The capital market regulator has come up with Expected Loss (EL) based rating scale to be used by credit rating agencies for ratings of infrastructure projects and instruments.
The new rating scale proposed by Sebi is as follows:
| Rating symbol | Definition |
| EL1 | Instruments rated EL 1 are considered to have the lowest expected loss, over the life of the instrument |
| EL2 | Instruments rated EL 2 are considered to have very low expected loss, over the life of the instrument |
| EL3 | Instruments rated EL 3 are considered to have low expected loss, over the life of the instrument |
| EL4 | Instruments rated EL 4 are considered to have moderate expected loss, over the life of the instrument |
| EL5 | Instruments rated EL 5 are considered to have high expected loss, over the life of the instrument |
| EL6 | Instruments rated EL 6 are considered to have very high expected loss, over the life of the instrument |
| EL7 | Instruments rated EL 7 are considered to have the highest expected loss, over the life of the instrument |
Rating symbols should have CRA’s first name as prefix.
In order to standardise the usage of the new rating system, Sebi has advised credit rating agencies to align their rating scales with the rating scales prescribed under the guidelines of respective financial sector regulator or authority in terms of Regulation 9(f) of CRA Regulations, or in absence of the same, follow rating scales prescribed by the Board.
The credit rating agencies shall ensure compliance with the new rating guidelines latest by 31 March 2022 and also place the compliance status before their Board of Directors.
Further, the rating agencies are advised to confirm compliance to SEBI latest by 15 April 2022. All the provisions of this circular are applicable with immediate effect.
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