SEBI introduces a credit risk-o-meter for debt securities

Securities and exchange board of India (SEBI) introduced a credit risk-o-meter for debt securities on Wednesday aimed to assist investors in assessing credit risk through colour-coded visualization prior to investing. The disclosure of risk-o-meter will be applicable to all listed and proposed to be listed issuances of non-convertible securities (NCS), commercial papers (CPs), securitized debt instruments (SDIs), security receipts (SRs) and structured debt /market-linked debentures (MLDs), whether issued by way of public issue or private placement.

The new risk-o-meter will have to be mandatorily included in offer document, abridged prospectus, private placement memorandum, all ads of issuer and online bond platform provider (OBPPs) and their web and mobile platforms. The regulator has asked the exchanges and depositories to put in place necessary systems and processes to implement the measure within the next 45 days.

Further, the regulator also exempted issuers issuing debt securities or non-convertible redeemable preference shares on a private placement basis from the requirement of hiring a merchant banker. The regulator had proposed the same in its consultation paper in August 2026. The exemption will only be applicable if the issuer is registered or regulated by a financial sector regulator in India (like SEBI, RBI, IRDAI or PFRDA) or the issuer is listed in any segment on any of the recognized stock exchange for a period of at least one year with no pending fines or penalties.

The issuer must also not have defaulted in the last three financial years and the current financial year on any payments due in respect to the securities like repayment, interest, dividend. The exemption will be applicable only for unsubordinated or senior debt securities rated AA- or above secured by a first or pari-passu charge on the identifiable assets of the issuer. For public issuers, however, the debt securities can be secured or unsecured. If a debt security has multiple ratings, the lowest rating will be considered for determining eligibility for exemption.

The regulator also increased the maximum number of international securities identification numbers (ISINs) maturing in a financial year for issuance of debt securities on a private placement basis from 14 to 17 with further six ISINs available for issuance of capital gains tax debt securities by authorized issuers. A maximum of 12 of these 17 ISINs will be allowed for the issuance of plain vanilla secured and unsecured debt securities with an aggregate upper limit of Rs 15,000 crore across issuances.

For each additional issuance of Rs 3,000 crore, one additional ISIN may be permitted to mature in the same financial year. A maximum of five ISINs maturing per financial year shall be allowed for structured debt securities, market-linked debt securities, floating rate bonds (FRBs), zero coupon bonds (ZCBs), and debt capital instruments (Tier II bonds). For issuers with only structured/market linked debt securities/FRBs/ZCBs/debt capital instruments (Tier II bonds), the upper limit will be of 12 ISINs in a financial year. Government of India serviced or extra budgetary resources (EBR) bonds, ESG debt securities will be excluded from calculating the ISIN limits.