SEBI Considers Permit for Agencies to Rate Non-Regulated Instruments

Quick Summary:

• SEBI (Securities and Exchange Board of India) has proposed allowing credit rating agencies to rate financial instruments regulated by other financial sector regulators.
• Agencies planning to expand their ratings will be required to establish a separate unit within six months, according to a consultation paper released on July 9, 2025.
• SEBI emphasized that these agencies must charge fees for their activities and maintain strict arm’s length separation from the unit that rates SEBI-regulated entities.
• SEBI’s move follows feedback from industry stakeholders about permitting such ratings,including for instruments like unlisted securities.
• The initiative is part of broader regulatory changes under its new chairman, Tuhin Kanta Pandey, signaling a more pragmatic oversight approach.

Indian Opinion analysis:

SEBI’s proposal reflects an effort to increase transparency and broaden the scope of assessments in India’s financial market ecosystem. Setting up separate units for non-SEBI-regulated ratings promotes organizational integrity by avoiding conflicts of interest between different rating functions. This initiative coudl enhance investor confidence while catering to evolving market needs as india’s financial system grows increasingly complex.

Though, operationalizing this change may create some initial transition costs or restructuring challenges for credit rating agencies as they establish new units within the stipulated timeframe. SEBI’s focus on industry feedback demonstrates its intent toward collaborative reforms rather than rigid regulations-a hallmark trait under Chairman Tuhin Kanta Pandey’s leadership.Link for read more: The Hindu