Sebi proposes to strengthen ERP framework

Mumbai: The Sebi has proposed additional provisions to strengthen the framework for ESG rating providers (ERP). ESG stands for environmental, social and governance. Under the credit ratings agencies regulations, an ERP cannot withdraw ratings except when the rated issuer is wound up or merged with another company or except in cases specified by Sebi. Sebi on Thursday proposed other circumstances under which the rating can be withdrawn by ERPs following a subscriber-pays business model and an issuer-pays model.

Under subscriber- pays business model, ERP can withdraw a rating provided there are no subscribers for rating as on the date of withdrawal. Where rated entity or instrument is part of a rating package such a rating may not be withdrawn. If a rating is withdrawn, the rating has to be withdrawn for all subscribers, Sebi said. Under the issuer-pays business model, ERP can withdraw the rating, provided it has rated security continuously for 3 years or 50% of tenure of the security, whichever is higher, and having received NOC from 75% of the bond holders by value.