SEBI Proposes to Broaden Credit Rating Agencies’ Scope

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  • Last Updated on 11 July, 2025

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SEBI CRA Scope Expansion

SEBI Report; Dated: 09.07.2025

The Securities and Exchange Board of India (SEBI) has issued a consultation paper outlining proposed regulatory changes for Credit Rating Agencies (CRAs). The proposals aim to expand the functional scope of CRAs while ensuring continued regulatory oversight and investor protection.

1. Current Restrictions Under CRA Regulations

As per the existing CRA Regulations, CRAs are restricted from engaging in any activity other than:

  • Rating of securities, and
  • Only those securities that are either listed or proposed to be listed on a SEBI-recognised stock exchange.

This limitation was primarily put in place to avoid potential conflicts of interest and to ensure the integrity of the rating process within capital markets.

2. Proposed Expansion in Scope of CRA Activities

In the consultation paper, SEBI has proposed two key relaxations:

  1. Permission to Rate Financial Products Regulated by Other Regulators

    • CRAs may be allowed to rate financial instruments that fall under the purview of other financial sector regulators (e.g., RBI, IRDAI, PFRDA), even if they are not listed or proposed to be listed.

  2. Rating of Unlisted Securities Without Specific Guidelines

    • CRAs may be permitted to rate unlisted securities even if there are no existing SEBI or other regulator-issued guidelines related to rating such instruments.
    • This would expand access to ratings for entities and instruments currently outside the formal rating regime.

3. Regulatory Safeguards and Oversight

While proposing a broader scope for CRAs, SEBI is expected to frame necessary checks and disclosures to:

  • Prevent conflict of interest,
  • Ensure transparency and consistency in ratings methodology, and
  • Safeguard the interests of investors and market participants.

4. Way Forward

SEBI has invited public comments on the proposals mentioned in the consultation paper. The feedback received will help SEBI finalise amendments to the CRA Regulations, which may reshape the regulatory framework for credit rating activities in India.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied