SEBI mandates Credit Risk-o-Meter for corporate bonds, eases merchant-banker rule

The Securities and Exchange Board of India (SEBI) has made a Credit Risk-o-Meter mandatory across the corporate debt market, a move aimed at protecting retail investors who increasingly buy bonds through online platforms.

The risk-o-meter must now appear in the offer document, abridged prospectus and private placement memorandum, in all advertisements by the issuer or online bond platform providers (OBPPs), and on the web and mobile listing pages of those platforms — before any investment action button. The meter maps alphanumeric ratings to a colour scale across six risk levels, from green (lowest risk) to red (high default risk).

Platforms must automatically update the visual meter within 24 hours of a rating downgrade, and for unsecured instruments they must print the word 'unsecured' in bold red text beneath the meter. On mobile apps, tapping the information ('i') icon must show the detailed meter consistent with the web view.

Separately, SEBI has relaxed the mandatory merchant-banker requirement for certain private placements — historically required for private debt issues at a ₹10,000 face value. Issuers that have been listed for at least one year with no pending compliance penalties, whose securities are unsubordinated, secured by a primary charge on identifiable assets and rated at least AA-, can now skip the merchant banker appointment.

SEBI said the relaxation should let established entities bring debt issues to market faster and cheaper, expanding the supply of high-rated bonds available to retail investors at smaller face values.