Credit Rating Agencies to be eligible to operate in India need to be registered with SEBI and comply with provisions of SEBI (Credit Rating Agencies) Regulations, 1999

As per the aforesaid Regulations the terms of "credit-rating" and "credit-rating agency" are defined as under-

• "rating" means an opinion regarding securities, expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency and used by the issuer of such securities, to comply with a requirement specified by these regulations;

• "credit rating agency" means a body corporate which is engaged in, or proposes to be engaged in, the business of rating of securities offered by way of public or rights issue;

Any person proposing to commence any activity as a credit rating agency on or after the date of commencement of these regulations shall make an application to the Board for the grant of a certificate of registration for the purpose. An application for the grant of a certificate under sub-regulation (1) or sub-regulation (2) shall be made to the Board in Form A of the First Schedule and shall be accompanied by a non-refundable application fee, as specified in Part A of the second schedule, to be paid in the manner specified in Part B thereof. ) Any person referred to in sub-regulation (2) who fails to make an application for the grant of a certificate within the period specified in that sub-regulation shall cease to carry on rating activity.

The Board shall not consider an application under regulation 3 unless the applicant is promoted by a person belonging to any of the following categories, namely:

1. a public financial institution, as defined in section 4 A of the Companies Act, 1956 (1 of 1956);

2. a scheduled commercial bank included for the time being in the second schedule to the Reserve Bank of India Act, 1934 (2 of 1934);

3. a foreign bank operating in India with the approval of the Reserve Bank of India;

4. a foreign credit rating agency recognised by or under any law for the time being in force in the country of its incorporation, having at least five years experience in rating securities;

5. any company or a body corporate, having continuous net worth of minimum rupees one hundred crores as per its audited annual accounts for the previous five years prior to filing of the application with the Board for the grant of certificate under these regulations.

The Board shall not consider an application for the grant of a certificate under regulation 3, unless the applicant satisfies the following conditions, namely:

1. the applicant is set up and registered as a company under the Companies Act, 1956;

2. the applicant has, in its Memorandum of Association, specified rating activity as one of its main objects;

3. the applicant has a minimum net worth of rupees five crores.

4. the applicant has adequate infrastructure, to enable it to provide rating services in accordance with the provisions of the Act and these regulations;

5. the applicant and the promoters of the applicant, referred to in regulation 4 have professional competence, financial soundness and general reputation of fairness and integrity in business transactions, to the satisfaction of the Board;

6. neither the applicant, nor its promoter, nor any director of the applicant or its promoter, is involved in any legal proceeding connected with the securities market, which may have an adverse impact on the interests of the investors;

7. neither the applicant, nor its promoters, nor any director, of its promoter has at any time in the past been convicted of any offence involving moral turpitude or any economic offence;

8. the applicant has, in its employment, persons having adequate professional and other relevant experience to the satisfaction of the Board;

9. neither the applicant, nor any person directly or indirectly connected with the applicant has in the past been -

   1. refused by the Board a certificate under these regulations or

   2. (ii) subjected to any proceedings for a contravention of the Act or of any rules or regulations made under the Act.

      Explanation: For the purpose of this clause, the expression "directly or indirectly connected person" means any person who is an associate, subsidiary, inter-connected or group company of the applicant or a company under the same management as the applicant.

10. the applicant, in all other respects, is a fit and proper person for the grant of a certificate;

11. grant of certificate to the applicant is in the interest of investors and the securities market.

1. The certificate granted under regulation 8 shall be, subject to the following conditions, namely:

   1. the credit rating agency shall comply with the provisions of the Act, the regulations made thereunder and the guidelines, directives, circulars and instructions issued by the Board from time to time on the subject of credit rating.

   2. where any information or particulars furnished to the Board by a credit rating agency is found to be false or misleading in any material particular; or has undergone change subsequently to its furnishing at the time of the application for a certificate; the credit rating agency shall forthwith inform the Board in writing.

2. the period of validity of certificate of registration shall be three years.

Every credit rating agency shall abide by the Code of Conduct contained in the third schedule to the Regulations

Every credit rating agency shall enter into a written agreement with each client whose securities it proposes to rate, and every such agreement shall include the following provisions, namely:-

1. the rights and liabilities of each party in respect of the rating of securities shall be defined

2. the fee to be charged by the credit rating agency shall be specified;

3. the client shall agree to a periodic review of the rating by the credit rating agency during the tenure of the rated instrument

4. the client shall agree to co-operate with the credit rating agency in order to enable the latter to arrive at, and maintain, a true and accurate rating of the clients securities and shall in particular provide to the latter, true, adequate and timely information for the purpose.

5. the credit rating agency shall disclose to the client the rating assigned to the securities of the latter through regular methods of dissemination, irrespective of whether the rating is or is not accepted by the client;

6. The client shall agree to disclose, in the offer document;-

   1. the rating assigned to the client's listed securities by any credit rating agency during the last three years and

   2. any rating given in respect of the client's securities by any other credit rating agency, which has not been accepted by the client.

7. the client shall agree to obtain a rating from at least two different rating agencies for any issue of debt securities whose size is equal to or exceeds, rupees one hundred crores.

1. Every credit rating agency shall, during the lifetime of securities rated by it continuously monitor the rating of such securities.

2. Every credit rating agency shall disseminate information regarding newly assigned ratings, and changes in earlier rating promptly through press releases and websites, and, in the case of securities issued by listed companies, such information shall also be provided simultaneously to the concerned regional stock exchange and to all the stock exchanges where the said securities are listed.