Amendment to Para 15 of Master Circular for Credit Rating Agencies (CRAs) dated May 16, 2024
Summary
This circular amends the Master Circular for Credit Rating Agencies to address technical defaults arising from reasons beyond the issuer's control. It mandates specific verification procedures by CRAs, including confirmation of funds and escrow deposits, before treating such events as non-defaults. The term 'technical default' is removed from Para 15.3, and new disclosure requirements are imposed on CRAs regarding these instances.
Text
A delay of 1 day even of 1 rupee (of principal or interest) from the scheduled repayment date constitutes default, with no exemption except for rescheduling prior to due date.
After a default is cured, a CRA shall generally upgrade rating from default to non-investment grade after 90 days based on satisfactory performance, subject to framing a detailed policy.
In cases of failure to remit payment due to incorrect investor account info or government freeze, the CRA shall confirm adequate funds, proof of failure, reasons, and payment into a separate escrow account.
For all such instances, the CRA shall furnish details including Name of security, ISIN, Amount to be paid, Due date, Amount made, Amount failed, and Reasons for failure to Stock Exchanges, Depositories and Debenture Trustee on the same day.
CRAs shall sensitise their clients, i.e. the issuers, to avail of the penny-drop verification facility offered by banks to avoid occurrence of failure to remit payments.
The term 'technical default' is hereby omitted from Para 15.3 of the Master Circular and the said para stands modified.
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 Regulation 20 of CRA Regulations.
Source: SecMarx — Amendment to Para 15 of Master Circular for Credit Rating Agencies (CRAs) dated May 16, 2024. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.