India's SEBI Introduces Colour-Coded Credit Risk-o-Meter for Debt Securities, Effective in 45 Days
SEBI issued a circular on 7 October introducing a mandatory colour-coded credit risk-o-meter for debt securities, mapping credit ratings from AAA to D into six risk levels and requiring disclosure by issuers and online bond platforms, with the rules taking effect 45 days later.
The Securities and Exchange Board of India (SEBI) issued a circular on Wednesday (7 October 2026) introducing a mandatory colour-coded credit risk-o-meter for debt securities to help investors assess credit risk before investing.
According to the SEBI circular, the credit risk-o-meter must appear in issuers' offer documents, abridged prospectuses, private placement memoranda, advertisements, as well as on the websites and mobile platforms of online bond platform providers (OBPPs) and OBPPs themselves.
The framework will apply to all listed and proposed-to-be-listed non-convertible securities, commercial papers, securitised debt instruments, security receipts and structured debt/market-linked debentures, whether issued through public offering or private placement.
On risk classification, SEBI's existing credit ratings from AAA to D will be mapped into six risk levels, each represented by a colour. SEBI said AAA-rated securities are classified as having the lowest credit risk, followed in order by very low, low, moderate, moderately high default risk and very high to extremely high default risk, corresponding to ratings down to D. The colour-coding scheme will apply to all digital and colour-printed promotional materials for the specific debt securities.
On disclosure, issuers and OBPPs must also disclose in text below the risk-o-meter the name of the credit rating agency (CRA) and the actual credit rating of the corresponding debt securities. For unsecured debt instruments, the word "unsecured" must be displayed in bold red text. SEBI said that where a debt security carries ratings from multiple credit rating agencies, the credit risk-o-meter will reflect the lowest rating, but all ratings may be disclosed.
SEBI noted that the meter represents only the credit risk associated with the debt securities and does not constitute investment advice or a recommendation to invest. Debt investments also carry market and liquidity risks.
On the update mechanism, OBPPs must update any change in the meter within 24 hours of receiving a rating change notification from NSDL or CDSL. Manual override of the classification will be prohibited, and platforms must maintain an audit trail of rating changes and meter updates.
SEBI said the provisions of the circular will take effect 45 days from the date of issuance.