RBI Grade BNABARD ESISEBI
In one line
SEBI issued a circular introducing a mandatory colour-coded Credit Risk-o-Meter, to help investors assess the credit risk of debt securities.
Context of the News
What Is It?
“RBI MPC Unpacked: Key Theory Meets Today’s Macro Trends”Tap to play · from the C4S channel
- A visual, colour-coded indicator showing how risky a debt security is
- Based on mapping existing credit ratings to simple risk levels
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How Does It Work?
- SEBI’s existing credit ratings, from AAA to D, are mapped to six risk levels
- Ranging from “Lowest Credit Risk” to “High to Very High Risk of Default”
- Each level has its own colour
Where Must It Be Displayed?
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- Offer documents
- Abridged prospectuses
- Private placement memoranda
- All advertisements by issuers and Online Bond Platform Providers (OBPPs)
- The web and mobile platforms of OBPPs
Which Instruments Are Covered?
- Non-Convertible Securities (NCS)
- Commercial Papers (CPs)
- Securitised Debt Instruments (SDIs)
- Security Receipts (SRs)
- Structured Debt and Market-Linked Debentures (MLDs)
Key Terms
- Credit risk: The risk that the borrower will fail to repay
- Credit rating: An agency’s assessment of that risk, from AAA (safest) down to D (default)
- NCD / NCS: Non-Convertible Debenture or Security — a bond that cannot be converted into shares
- Commercial Paper: A short-term unsecured borrowing instrument used by companies
- MLD: Market-Linked Debenture — a bond whose return depends on the performance of a market index
- Private placement: Selling securities to a selected group rather than the public
- OBPP: Online Bond Platform Provider — a SEBI-registered platform selling bonds to retail investors
