Credit Rating Agency Registration- An Overview Are you aiming to perform credit rating activities but unaware of the challenges in the journey? If yes, you must seek Enterslice expert guidance and secure credit rating agency registration with SEBI. The credit rating agency is a body corporate involved in the rating of securities (i.e., either listed or proposed to be listed on the recognized stock exchange). It generally evaluates the creditworthiness of individuals, companies, governments, or other borrowing entities. The credit rating agency SEBI registration is crucial to analysing the debtor company's willingness and ability to repay the interest and principal on the debt instrument in a timely manner. It establishes a link between risk and returns by doing the calculation based on its financial history, current assets, and liabilities. Worried about preparing documents and getting a credit rating agency license effortlessly? Talk to Enterslice experts for hassle-free online Credit rating agency registration. What Does Credit Rating Mean? Credit rating refers to the assessment of the possible risks of credit associated with granting financial instruments to an individual or a company. The credit rating, which refers to the typical rating of debt securities, short-term debt instruments, structured debt obligations, loans, and fixed deposits, is provided on the basis of the creditworthiness and credentials of an individual or a company. Simply, it assesses the borrower’s willingness and ability to repay the rated obligation in consonance with the terms and conditions. Regulation of Credit Rating Agency License The Securities and Exchange Board of India (Credit Rating Agency) Regulations of 1999 is the framework designed to structure and register the credit rating agencies in India. The CRA Regulations of 1999 provide for the obligations, disclosure of ratings, and accountability (conduct internal audit) of the credit rating agencies. Our experts at Enterslice are well-versed in the regulation of credit rating agency license. In 2010, a circular was issued by the Securities and Exchange Board of India to define the role of credit rating agencies in the Indian market. Further, the CRA regulations elaborated on the credit rating agency registration with SEBI. Benefits of Online Credit Rating Agency Registration The popularity of credit rating agencies has grown widely among investors and the Indian financial market in the past two decades. If you want your company to function as a credit rating agency, you must obtain a credit rating agency license. Given below are the significant benefits of online credit rating agency registration in India- Investor Protection SEBI requires credit rating agencies to monitor as well as review the ratings of securities they rate. Online credit rating agency registration protects the interests of investors. Provides Low-Cost Information The credit rating agency provides low-cost information by collecting, analyzing, interpreting, and making proper conclusions about complex data. Gives Superior Information The credit rating agencies deliver superior information from trained and skilled professionals. Basis for Risk and Return The instruments rated by credit rating agencies provide an idea regarding the risks associated with the instruments. Benchmark for Financial Regulators Credit rating agency registration set benchmarks for accessing risks within the system of financial regulators and policymakers. Market Transparency The credit rating agencies ensure market transparency by providing independent and objective opinions on borrowers’ financial health. Market Size of Credit Rating Agency The market size of a global credit rating agency is approx. $ 8.6 billion. The projected growth rate from 2013 to 2028 is expected to grow at a CAGR of 6.1%. What is the Revenue Stream for Credit Rating Agencies? The credit rating agencies use the issuer pay model for revenue generation. The two main revenue streams of credit rating agencies are the service and subscriber fees charged by the issuers for rating their debt. Eligibility Criteria to Get Credit Rating Agency Registration Regulation 5 of the SEBI (Credit Rating Agencies) Regulations of 1999 prescribes the eligibility criteria for the credit rating agency registration in India. The following are the eligibility criteria that the applicants must satisfy: Company registered under the Companies Act of 2013; Minimum net worth of Rs. 25 crores; Adequate infrastructure; Must be professionally and financially sound; Must not be involved in any legal proceedings of the securities market; Must not be convicted of any offence of moral turpitude; Must be fit and proper as prescribed; Such other requirements as prescribed by regulations. Documents Required for Credit Rating Agency SEBI Registration Specific documents are required for a credit rating agency SEBI registration as prescribed under the regulations of 1999. Consider the following list of documents and information required to acquire the credit rating agency registration certificate: Certificate of Incorporation; Address proof of the branch offices; Details of Directors and key personnel; Infrastructure holding of the applicant company; Memorandum of Association; Articles of Association; Experience in Credit Rating Activities; Financial information of the applicant; Declaration signed by at least 2 directors. For easy peasy documentation for credit rating agency SEBI registration, talk to Enterslice experts today. Procedure for Online Credit Rating Agency Registration The applicants must apply to SEBI to acquire a credit rating certificate of registration in India. The process for online credit rating agency registration in India is mentioned below: Step 1: Appointment of Promoter Initially, the applicant must appoint a promoter holding relevant qualifications for filing the application for credit rating agency registration. The promoter must hold the following qualifications as provided below: Public financial institution; Scheduled commercial bank; Foreign bank operating in India; Foreign credit rating agency; Any company or body corporate with a minimum net worth of Rs. 100 crores. Step 2: Filing Form A The person proposing to commence any activity as a credit rating agency must apply to SEBI through application Form A as prescribed in Schedule I of the regulation. Step 3: Consideration of Application by SEBI The application filed under Regulation 3 must only be considered when the applicant is promoted by a person belonging to one of the following categories: Public Financial Institution Scheduled Commercial Bank Foreign Bank Operating in India with RBI approval Foreign Credit Rating Agency having at least five years’ experience in rating securities; Any company or body corporate with a net worth of at least Rs. 100 crores in the previous 5 years. Step 4: Clarification and Personal Representation In the next step, Regulation 7 of the SEBI (Credit Rating Agency) Regulations of 1999, authorizes the credit rating agency to personally appear before the authorized representative or seek clarification for any necessary information regarding the application filed. Step 5: Grant of Credit Rating Certificate of Registration After being satisfied in all respects, SEBI is authorized to grant a credit rating certificate of registration in Form B along with an intimation to the applicant along with a receipt of payment of the requisite fees. Use WhatsApp to simplify the process of credit rating agency registration with our seasoned professionals. Post-Registration Compliances for Credit Rating Agencies Every registered credit rating agency must adhere to the post-registration compliances as prescribed under the provisions of the SEBI (Credit Rating Agency) Regulations of 1999. The following are the post-registration compliances that must be duly followed by the credit rating agencies: Frame Procedure & System for Trading Every SEBI-registered credit rating agency must frame appropriate procedures and systems for carrying out and monitoring the trade of securities Furnish Necessary Information The credit rating agencies must furnish the required information (including balance sheet and profit and loss account) to the Securities and Exchange Board of India within the specified period. Maintaining Books of Accounts Every credit rating agency must maintain a copy of the books and accounts (including balance sheet, profit & loss account, auditor’s report, agreement with the client, etc.) for at least 5 years of period. Appointment of Compliance Officer The credit rating agency must appoint a compliance officer holding the authority to monitor and immediately report to the board regarding any non-compliance with the provisions of the regulation. Validity of Certificate of Registration The grant of the credit rating of registration is valid until it is suspended or cancelled by the Securities and Exchange Board of India. Also, upon satisfaction of the required conditions, the board grants the certificate of registration for a validity period of 5 years. Also, the applicants must renew the credit rating agency at least 3 months before the date of expiry of the validity period of the credit rating agency registration certificate granted by SEBI. Recent Updates about Credit Rating Agencies under the SEBI Recent updates issued under the SEBI (Credit Rating Agencies) (Amendment) Regulations of 2018 and the Master circular for Credit rating agencies in 2024 provide for the following: The credit rating agency must increase its net worth up to a specified limit within 3 years; The promoter of a credit rating agency must maintain a minimum 26% shareholding for at least 3 years from the grant of registration; Provides for online registration mechanism for securities market intermediaries like credit rating agencies; Provision for grant of prior approval for any change in control of Credit rating agency; Provision for the surrender of the certificate of credit rating agency registration. How Does Credit Rating Agencies Work? Credit rating agencies generally work by assigning the value of credit risk of securities like bonds and loans. These agencies are authorized to rate the companies, state governments, NPOs, countries, securities, local government bodies, and special purpose entities. The credit rating agencies don’t decide upon the credit facility of the financial institutions. Further, it only provides a report to simplify the decisions related to lending. Role of Credit Rating Agencies The duly registered credit rating agencies perform diverse roles prescribed under Chapter III of the SEBI (Credit Rating Agency) Regulation of 1999. The following is the role of credit rating agencies duly registered under the SEBI guidelines: Agreement with Client Every credit rating agency must enter into a written agreement with clients for the rating of securities. The agreement must comprise fees charged, client rating, rights, and liabilities of each party entering the agreement. Review and Monitoring of Rating Every registered credit rating agency must periodically review and monitor the rating of the securities unless the rating is withdrawn under Regulation 16 (3). Compliance with SEBI Circulars Every credit rating agency must comply with the guidelines, derivatives, or any circulars SEBI from time to time. List of Credit Rating Agencies Registered with SEBI There exist seven (7) credit rating agencies registered under the Securities and Exchange Board of India. The following is the list of credit rating agencies registered with SEBI and authorized for the computation of the credit score or report: CRISIL Limited (Credit Rating Information Services of India Limited); India Ratings and Research Private Limited; ICRA Limited (Investment Information and Credit Rating Agency); CRAE (Credit Analysis and Research Limited); Brickwork Ratings India Private Limited; SMERA Ratings Limited; Infomerics Valuation and Rating Private Limited. Credit Rating Agencies Registration Fees The applicants applying for a credit rating agency in India must pay a specified amount of fees as prescribed under the 2nd Schedule of SEBI (Credit Rating Agency) Regulations of 1999. The following fees must be paid within 15 days of the receipt of intimation from SEBI: An application fee of Rs. 50,000/- for the grant of a certificate of registration from SEBI; A registration fee of Rs. 26,66,700/- is charged; A recurring registration fee of Rs. 15,00,000/- is charged after every 3 years. Timeline for Credit Rating Agency SEBI Registration The time required for Credit Rating Agency SEBI registration in India is approximately 90 to 180 Days. However, it may be extended in case of regulatory delay. Why Choose Enterslice for a Credit Rating Agency License? At Enterslice, we are blessed with a strong network of 10,000+ professionals, including business consultants, company secretaries, chartered accountants, regulatory experts, and lawyers. Given below are the reasons why we are the most trusted consulting partner for getting assistance in securing a credit rating agency license- Consistently High Approval Rate for Credit Rating Agency Registration Applications More than a Decade of Experience with SEBI Credit Rating Agency Registration Regulations High Precision and 100% Accuracy in Application Filing for Credit Rating Agency SEBI registration Expertise in Preparing Risk Assessment Models for Credit Rating Agencies 24/7 Expert Helpline to Resolve Your Queries in No Time In-depth Guidance on Regulation of Credit rating Agency License Ensure Reduction in Compliance Burden by 30% Assist you Understand the Structure of Credit rating Agency License Post-registration Support
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