SEBI Mandates Color-Coded Credit Risk-o-Meter for Debt Securities

The Securities and Exchange Board of India mandated the use of a color-coded Credit Risk-o-Meter for debt securities on October 7, 2026. The tool maps credit ratings from AAA to D into six risk levels, ranging from lowest credit risk to a very high risk of default. A separate version of the meter will be used for short-term ratings from A1+ to A4/D.

The mandate applies to commercial papers, securitized debt instruments, security receipts, structured debt or market-linked debentures, and non-convertible securities that are listed or proposed for listing. The meter must appear in prospectuses, offer documents, advertisements, and on Online Bond Platform Provider websites and apps. If multiple agencies provide ratings, issuers must display the lowest rating. For unsecured instruments, the word unsecured must be displayed in bold red text, while a grey INC zone will identify issuers marked as Issuer Not Cooperating.

Online Bond Platform Providers must use automated systems from SEBI-registered agencies to update the meter within 24 hours of any rating change. The regulator also prescribed disclaimers to clarify that the meter is not investment advice and to warn investors of structural, liquidity, and market risks, specifically for AT1 bonds. The framework takes effect approximately 45 days after issuance, around November 21-22.