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SEBI Standardises Industry Classification For Credit Rating Agencies

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SEBI Standardises Industry Classification For Credit Rating Agencies
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SEBI has standardises industry classification for credit rating agencies

To bring in uniformity, capital markets regulator Securities and Exchange Board of India (SEBI) on Friday came out with a standardised framework for the classification of industry, which will be used by credit rating agencies (CRAs) for the purpose of rating exercise and research activities.

The industry classification will be applicable to CRAs with effect from October 1, 2022, the regulator said in a circular.

In the meantime, any feedback and suggested changes by CRAs shall be recalibrated by exchanges, wherever feasible, it added.

The standardised framework will help bring about uniformity in the classifications being used across sectors and in securities market.

After examining the existing industry classification structures across sectors, the Market Data Advisory Committee (MDAC), a standing committee constituted by SEBI, developed a harmonised four-level industry classification framework for adoption by all stakeholders and for all relevant processes or purposes in the Indian securities market.

The committee comprises representatives from stock exchanges, depositories and other market participants.

Under this, the regulator has categorised industries on the basis of macroeconomic indicators, sector, industry and basic industry.

The regulator has asked CRAs to use this standardised industry classification for the purpose of rating exercise, peer benchmarking, research activities including research for economy, industries and companies etc.

In a separate circular, SEBI has extended the deadline till June 30, 2022 for CRAs to align their rating scales.

Earlier, they were required to comply with the rules by March 31.

Under this, rating agencies will have to align their rating scales with the scales prescribed under the guidelines of respective financial sector regulator or authority in terms of CRA Regulations, or in absence of the same, follow rating scales prescribed by SEBI.

The move is aimed at standardising the usage of rating scales.

In cases where a rating scale has not been prescribed by a financial sector regulator or authority, CRAs will only use rating scales prescribed by SEBI from time to time.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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