Sebi asks rating companies for policy on non-rating units

Markets regulator Sebi on Wednesday asked credit rating agencies (CRAs) to formulate a policy on firewall practices with the non-rating entities and document the same in their internal operational manuals. Such a policy will have to be ratified by the board of directors of the CRAs, the Securities and Exchange Board of India (Sebi) said in a circular.

In addition, a CRA will have to disclose on its website, details of any common director or chief executive officer or managing director between the CRA and the non-rating entity.

Such disclosures need to be updated by the CRA on the first working day of each month. The disclosure should include a reference to the date it was last updated by the CRA, along with a reference or hyperlink to archives of previous such disclosures.


Sebi said the policy on firewall practices would cover the nature and extent of sharing of infrastructure, employees and resources between the CRA and the non-rating entity, including specification on whether such arrangement is temporary.

In order to mitigate any conflict of interest, the policy needs to have guidance to employees on sharing of information and resources between the CRA and the non-rating entity.

Besides, the policy needs to cover measures taken by CRA to ensure the independence of its credit rating process in view of this arrangement with the non-rating entity.

Also, the websites of registered CRAs and their non-rating entities should be separate. A CRA's website may contain hyperlinks to the separate websites of the non-rating entities.

The new measures, applicable from January 1, 2023, are aimed at strengthening the firewall between Sebi-registered CRAs and their non-rating entities.