CIRCULAR
SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/ 70 May 15, 2025
To,
All Registered Credit Rating Agencies (CRAs)
All Registered Debenture Trustees,
Issuers who have listed and/ or propose to list Non-Convertible Securities,
Securitized Debt Instruments, Security Receipts, Municipal Debt Securities or
Commercial Paper
Recognized Stock Exchanges
All Depositories registered with SEBI
Dear Sir / Madam,
Sub: Rating of Municipal Bonds on the Expected Loss (EL) based Rating Scale
1. Para 5.6.1 of the Master Circular for Credit Rating Agencies (CRAs) ("Master
Circular") dated May 16, 2024 provides that in addition to the standardized rating
scales prescribed for various instruments, an Expected Loss (EL) based Rating
Scale may be used by CRAs for ratings of projects/ instruments associated with
infrastructure sector.
2. Pursuant to deliberations with various stakeholders, including the Corporate
Bonds and Securitisation Advisory Committee (CoBoSAC), it is felt that EL
Ratings, when used along with standardized rating scale/ Probability of Default
(PD) Rating, can better reflect the recovery prospects of municipal bonds. Further,
Urban Local Bodies/ Municipalities issue bonds primarily for the creation/
development of infrastructure. Therefore, it has been decided that CRAs may, in
addition to the standardised rating scale, extend the EL-based Rating Scale for
rating of Municipal Bonds which are issued for financing infrastructure assets.
3. This circular shall be applicable with immediate effect.
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4. This circular is issued with the approval of competent authority, 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 CRA Regulations to protect
the interest of investors in securities and to promote the development of, and to
regulate, the securities market.
5. This Circular is available on the website of the Securities and Exchange Board of
India at www.sebi.gov.in under the category “Legal” and under the drop down
“Circulars”.
Yours faithfully,
Ritesh Nandwani
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No.022-2644-9696
Email ID - riteshn@sebi.gov.in
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