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SEBI Introduced EL-based Rating Scale for CRAs

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To protect the interest of investors in securities, the Securities and Exchange Board of India (SEBI) has introduced a new standardised Expected Loss (EL) based RatingScale for the Credit Rating Agencies (CRAs).

  • The EL based RatingScale has to be used by the CRAs while rating projects/instruments associated with the infrastructure sector.
  • The EL-based rating symbols and their definitions provided by the CRAs were divided into a scale of 7 levels, spanning from lowest to highest expected loss.

i.7 Levels of EL Based Rating Scale:

  • The Rating symbols need to have CRA’s first name as a prefix.
Rating SymbolDefinition for Instruments based on the rating symbol over the life of it
EL 1Instruments Rated ‘EL 1’will indicate the lowest EL, over the life of the instrument
EL 2Very low EL
EL 3Low EL
EL 4Moderate EL
EL 5High EL
EL 6Very high EL
EL 7Highest EL
    • The CRAs should disclose new rating symbols and definitions on their websites for existing outstanding ratings and update their rating lists on their websites.

    ii.Standardisation of Rating Scales Used by CRAs: To standardise the usage of rating scales, SEBI directed CRAs to align their rating scales with the rating scales that are prescribed under the guidelines of the respective financial sector regulatory/authority in terms of CRA Regulations.

    Note – In the absence of such guidelines, they were instructed to follow rating scales prescribed by SEBI.


    i.The CRAs should ensure compliance with the current ratings by March 31, 2022. They also need to confirm compliance with the new framework to SEBI by April 15, 2022 and have to place the compliance status of it before their Board of Directors.

    ii.The provisions related to the standardisation of rating scales are stated to be effective from April 1, 2022.

    Note – The current EL based Ratings are issued in exercise of the powers conferred by Section 11 (1) of SEBI Act, 1992 read with the provisions of Regulation 20 of SEBI (CRA) Regulations, 1999.


    i.It is an entity that assesses the ability and willingness of the issuer company for timely payment of interest and principal on a debt instrument. The ratings will be assigned to security or an instrument.

    ii.The rating symbols represent the probability of the degree of repayment risk associated with debt instruments.

    Recent Related News:

    In June 2021, SEBI issued frameworks for the Investment Adviser Administration and Supervisory Body (IAASB). An entity granted recognition under the investment advisers (IAs) rules by SEBI will be designated as – IAASB, and it will be allowed to administer and supervise the IAs.

    About Credit Rating Agencies (CRAs): 

    i.CRAs will be regulated by SEBI through the SEBI (CRA) Regulations, 1999, but SEBI will not be involved in the assessment made by the rating agency.

    ii.Credit Rating and Information Services of India Limited (CRISIL) is India’s 1st CRA.