The Securities and Exchange Board of India (SEBI) is empowered to regulate and verify credit rating agencies in compliance with the SEBI Regulations, 1999, under the SEBI Act, 1992. Credit rating is an assessment of the probability of default on payment of interest and principal on a debt instrument. It is not a recommendation to buy, sell or hold a debt instrument. Rating only provides an additional input to the investor and the investor is required to make his own independent and objective analysis before arriving at an investment decision.

After evaluating a business, person or other entity's financial standing, credit rating agencies give them a rating based on their performance criteria. Previous Financial statements, debt category, borrowing and lending history, repayment history, and previous credit repayment nature are some of the factors that incorporate into the final rating. Every one of these components contributes to the final credit rating.

However, the entity's eligibility for a credit facility is not made by credit rating agencies. But rather, they offer final reports and additional information to guide lenders in making profitable choices.

Credit Rating Agencies Under SEBI

Credit rating agencies in India regulated under the Securities and Exchange Board of India (SEBI) as per the Credit Rating Regulations, 1999. Under the SEBI regulations, new Credit Rating agency must obtain SEBI registration before commencing their business.

Functions of Credit Rating Agencies:

• Modify ratings only when there are major changes in the financial of an entity.
• Assess the Issuer’s willingness.
• Provide an independent opinion on credit risk without issuing investment recommendations.
• Rate entities rather than individual issuers.

Documents Required for Credit Rating Agency Registration

In order to register with Securities and Exchange Board of India (SEBI) as per the Credit Rating Regulations, 1999. the following documents are required i.e:

• Contact details of the applicant.
• Certificate of Incorporation Under Companies Act.
• Details of management & directors including their professional backgrounds.
• Proof of minimum net worth of Rs.5 crores.
• Business-related information associated with the company.
• Infrastructure-related documentation ensuring operational capability.
• Any additional documents requested during the verification process.
• Articles of Association (AOA) and Memorandum of Association (MOA) providing the company’s objectives.

How to Submit Your Application for Credit Rating Agency Registration with SEBI?

Any companies or organization wants to operate as a credit rating agency must submit an application to SEBI using Form A, along with a non-refundable fee. The SEBI board may consider such applications only if the applicant has the following documents:

• A public financial institution.
• A foreign bank operating in India with RBI approval.
• A scheduled full-service bank.
• A copy of foreign credit rating agency with at least five years of experience and legal recognition.

Before issuing a registration certificate, SEBI authority assesses whether the applicant fulfills all the necessary eligibility requirements. If the application is failed to provide or does not comply with regulatory standards, SEBI may reject the application.

However, applicants are given one- month time-period to rectify submit missing documents. After the application is registered, the applicant is required to notified and, after paying the required licensing fee, receives the registration certificate in Form B.

• This certificate remains valid for five years.

Criteria for Credit Rating Agency Registration

To register your organization as a credit rating agency in India, must fulfill the following requirements:

• Companies Minimum net worth of Rs. 25 crores.
• A company incorporated under the Companies Act, 2013.
• Possess sufficient infrastructure to conduct rating activities.
• Demonstrate financial and professional competence.
• Not be involved in any illegal proceedings related to the securities market.
• Not have any previous convictions for crimes involving moral ground.
• Comply with the "fit and proper" criteria set by SEBI.
• In compliance with any additional requirements specified by SEBI regulations.

New Update on Credit Rating Agencies by SEBI In 2025

Securities and Exchange Board of India (SEBI) updated the new timelines for credit rating agencies (CRAs), changing the timeline from calendar days to working days for key rating actions. This update, announced in a circular on January 8, 2025, follows discussions with the CRA working group to improve compliance flexibility.

The move addresses challenges CRAs face when relying on external entities like bankers and debenture trustees, particularly during holidays and weekends.

• Clause 9.2.2: CRAs must now publish a press release on rating actions, including reaffirmations, within seven working days instead of calendar days.
• Clause 9.3.3: In cases of delayed interest or principal payments, CRAs must conduct a rating review and issue a press release within two working days of receiving the issuer’s statement (previously two calendar days).
• Clause 11.3: Ratings must be tagged as ‘INC’ within five working days after three consecutive months of missing the no-default statement (NDS), replacing the earlier seven-calendar-day rule.
• Clause 28.2.1: If a debenture trustee does not confirm debt servicing, CRAs must follow up within one working day and issue a press release within two working days, replacing the earlier calendar-day requirement.

These changes help CRAs manage operational constraints and allow sufficient time for external confirmations, as per SEBI's circular.

What is the Registration Fees for Credit Rating Agencies?

Whoever the applicants seeking registration as a credit rating agency in India must pay specific fees as provided in the 2nd Schedule of the SEBI (Credit Rating Agency) Regulations of 1999. These fees are to be paid within 15 days of receiving an intimation from SEBI:

• Rs. 50,000/- for applying for a certificate of registration from SEBI.
• Rs. 26,66,700/- charged upon successful registration.
• Rs. 15,00,000/- payable for continued registration in every three years .

Timeline

The process for registering a credit rating agency with SEBI usually takes between 90 to 180 days. The timeline may be extended in case of delays in the regulatory process.