India’s markets regulator, SEBI, has eased regulations, allowing credit rating agencies to assess a broader range of financial products beyond traditional debt, while implementing strict safeguards to ensure investor protection and maintain industry standards.
India’s markets regulator has opened the door for credit rating agencies to expand beyond their traditional role in rating debt, allowing them to assess financial instruments overseen by regulators other than the Securities and Exchange Board of India. The move creates a wider commercial opportunity for rating firms, but SEBI has paired it with strict safeguards designed to keep its own investor protection regime separate from activities falling under other authorities.
According to the report and SEBI’s February 2026 framework, agencies that take on these assignments must keep the two businesses clearly ring-fenced. That means separate email addresses, dedicated website sections for complaints and disclosures, and marketing and rating reports that identify the relevant regulator and make clear that SEBI’s investor protection rules do not cover those products. SEBI also requires rating agencies to satisfy its minimum net worth norms on their own, even if other regulators impose additional capital requirements.
The regulator has also widened the rules for ESG Rating Providers, including allowing subscriber-pays firms to share reports with both subscribers and issuers at the same time rather than circulating drafts first. These providers may also rate products and issuers overseen by other financial authorities, provided they disclose the governing regulator and comply with the relevant law. SEBI said the broader reforms are intended to improve ease of doing business, sharpen rating methods and lift disclosure standards across the industry.
In another significant change, SEBI has extended expected loss ratings to municipal bonds. The regulator says the additional framework should give investors a fuller view of project-based municipal issues by combining default probability with likely recovery prospects. The policy push comes as credit rating agencies remain central to financial markets, translating complex credit risk into standardised scores that help reduce information gaps and support pricing and capital allocation.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
