Transitory relaxation from compliance with certain provisions under SEBI (Credit Rating Agencies) Regulations, 1999

01 April, 2020

On March 30, 2020, The Securities and Exchange Board of India (SEBI) vide its Circular SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2020/53 has allowed Credit Rating Agencies (CRAs) a temporary relaxation in compliance with certain provisions of CRA Regulations. This is in view of the unprecedented economic lockdown arising due to the COVID-19 pandemic and also in light of the moratorium permitted by Reserve Bank of India (RBI) vide notification no. RBI/2019-20/186 dated March 27, 2020 on term loans or working capital facilities for a period of three months (March 1, 2020 to May 31, 2020).

Accordingly, if Acuité is of the view that the delay in payment of interest/principal has arisen solely due to the lockdown conditions creating temporary operational challenges in servicing debt, including due to procedural delays in approval of moratorium on loans by the lending institutions, it may not consider the same as a default event and/or recognize default. The decision will be based on Acuité’s analytical judgment and feedback from lenders and/or investors.

The above dispensation will be applicable to term loans, working capital term loans, bonds and debentures, fixed deposit, commercial paper and working capital facilities. This shall also be applicable on any restructuring/rescheduling in payment of debt obligation undertaken by the issuer, prior to the due date, with the approval of the investors/lenders. Further, in the latter cases, Acuité will consider the inclination and intent of lenders and investors to restructure / reschedule "in-principle” than wait for issuers to furnish formal documentation to such effect.

It may, however be noted that the above relaxation does not in any way, preclude Acuité from taking necessary rating actions. Acuité may, on a case-to-case basis and based on its assessment, effect an appropriate downward revision in the existing ratings if it believes there will be a longer term impact of the disruption on the business profile and liquidity position of the rated entity. Suitable disclosures regarding missed/delayed/restructured/rescheduled payments and the rationale for not downgrading the rating on an instrument to default, if applicable, shall be made in the Press Release.

Acuité will revert to its default recognition criteria on delayed and/or missed payments by issuers, at the end of the moratorium period.

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Our exciting journey started in 2005 with rating of bank borrowers most of whom were small and medium enterprises. At that time, credit rating was a concept known only to large issuers of capital market instruments. Since then, like a caterpillar transforms itself into a beautiful butterfly, we transformed to rate bonds, bank facilities of large corporates and issuers across industries. Along came many achievements - SEBI Registration in 2011, RBI accreditation in 2012, 50,000 ratings in 2018, 5,000 Bond and Bank Loan Ratings in 2017, launch of India's first Android and iPhone app to disseminate rating, tamper-proof QR-code-enabled rating rationales, and SMERA Terminal to name a few.

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Sankar Chakraborti