SEBI, by way of a circular dated November 13, 2016, has prescribed enhanced disclosures to be made by Credit Rating Agencies (‘CRAs’) to bring about greater transparency. The disclosures, inter alia, include:

(i)       CRAs to include rationales in the ‘analytical approach’ and ‘liquidity’ sections of the press release, when the rating either relies on support from group companies/ parent company and to highlight parameters like liquid investments or cash balances access to unutilized credit lines, liquidity coverage ratio, adequacy of cash flows for servicing maturing debt obligation etc.;

(ii)     CRAs to analyze the deterioration in the liquidity conditions of the issuer and also take into account any asset-liability mismatch while monitoring repayment schedules;

(iii)    CRAs may treat sharp deviations in bond spreads of debt instruments vis-à-vis relevant benchmark yield as a ‘material event’;

(iv)     CRAs to publish information about the historical average rating transition rates across various rating categories; and

(v)     CRAs to bi-annually furnish data on sharp rating actions in investment grade rating category to stock exchanges and depositories for disclosure on their respective websites.