The Securities and Exchange Board of India (SEBI), on November 18, 2024, issued a notification related to the Amendment to Para 15 of the Master Circular for Credit Rating Agencies.
SEBI has reiterated the definition of default for debentures and bonds as any delay of one day or one rupee in payment of principal or interest, except in cases of pre-approved debt rescheduling. This requirement remains unchanged as per SEBI (Credit Rating Agencies) Regulations, 1999. To address concerns arising from the COVID-19 pandemic, SEBI had introduced a 90-day post-default curing period for rating upgrades, allowing flexibility for certain deviations, subject to a CRA's internal policy and approval by its Ratings Sub-Committee.
Following recommendations from a Working Group, SEBI has issued guidance on non-payment scenarios due to reasons beyond the issuer's control, such as incorrect investor account details or regulatory account freezes. CRAs must verify the issuer's fund adequacy, confirm payment failures, and ensure the due amount is deposited in an escrow account. The term "technical default" has been removed, and CRAs are required to align their policies for consistent treatment of such cases. The circular is effective immediately.
[Notification No. SEBI/HO/DDHS/DDHS-PoD-3/P/CIR/2024/160]
