**Summary:**
SEBI Circular HO MIRSD CRADT CIR P 2020 160, issued August 31, 2020, provides Credit Rating Agencies (CRAs) with a relaxation from recognizing default due to debt restructuring. This relaxation applies when the restructuring is assessed by the CRA to be solely due to COVID-19 related stress or under the Reserve Bank of India (RBI) resolution framework outlined in notification no. RBI/2020-21/16 DOR.No.BP.BC/3/21.04.048/2020-21 dated August 6, 2020. CRAs are instructed to make appropriate disclosures in press releases regarding this assessment. This relaxation is effective until December 31, 2020. The circular is issued under the authority of Section 11(1) of the Securities and Exchange Board of India Act, 1992, and Regulation 20 of the SEBI Credit Rating Agencies Regulations, 1999. For further information, contact Surabhi Gupta, General Manager, at Tel No. 022-26449315 or via email at surabhig@sebi.gov.in.
Key Entities Referenced
SEBI: Securities and Exchange Board of India, the regulatory body issuing the circular.
Credit Rating Agencies: CRAs registered with SEBI, the entities to whom the circular is addressed.
RBI: Reserve Bank of India, which provided moratorium and resolution framework related to COVID-19.
COVID19: The pandemic that caused economic stress and led to regulatory relaxations.
Securities and Exchange Board of India Act, 1992: The act under which SEBI's powers are exercised.
SEBI Credit Rating Agencies Regulations, 1999: Regulations related to credit rating agencies under which the circular is issued.
Surabhi Gupta: General Manager at SEBI, the signatory of the circular.
RBI20202116 DOR.No.BP.BC321.04.048202021: RBI notification number regarding resolution framework for COVID19 related stress.
SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2020/ 160 August 31, 2020
To,
All Credit Rating Agencies (CRAs) registered with SEBI
Dear Sir/ Madam,
Sub: Relaxation from default recognition due to restructuring of debt.
1. CRAs recognize default based on the guidance issued vide SEBI circulars dated May
3, 2010 and November 1, 2016. Further, SEBI vide circular dated March 30, 2020 had
provided for relaxation from recognition of default owing to moratorium permitted by
RBI and lockdown due to COVID-19 pandemic.
2. The Reserve Bank of India (RBI), vide notification no. RBI/2020-21/16
DOR.No.BP.BC/3/21.04.048/2020-21 dated August 6, 2020, has provided for a
resolution framework for COVID-19 related stress.
3. Based on its assessment, if the CRA is of the view that the restructuring by the lenders/
investors is solely due to COVID-19 related stress or under the aforementioned RBI
framework, CRAs may not consider the same as a default event and/or recognize
default. Appropriate disclosures in this regard shall be made in the Press Release.
4. The above relaxation is extended till December 31, 2020.
5. This circular is issued in exercise of the powers conferred by Section 11 (1) of
Securities and Exchange Board of India Act, 1992 read with the provisions of
Regulation 20 of SEBI (Credit Rating Agencies) Regulations, 1999, to protect the
interest of investors in securities and to promote the development of, and to regulate,
the securities market.
Yours faithfully,
Surabhi Gupta
General Manager
Tel No. 022-26449315
Email id: surabhig@sebi.gov.in