To bring uniformity, the financial markets regulator Securities and Exchange Board of India (SEBI) on Friday released a standardized framework for industry classification, which will be used by credit rating agencies (CRAs) for exercise purposes. rating and research. Activities.
The sector classification will be applicable to rating agencies from October 1, 2022, specifies the regulator in a circular.
In the meantime, any feedback and changes suggested by credit rating agencies will be recalibrated by the exchanges, where possible, he added.
The standardized framework will help standardize classifications used across industries and the securities market.
After reviewing existing industry classification structures across all sectors, the Market Data Advisory Committee (MDAC), a standing committee established by SEBI, has developed a harmonized four-tier industry classification framework. levels for adoption by all stakeholders and for all relevant processes or objectives in India. securities market.
The committee includes representatives of stock exchanges, depositaries and other market participants.
Under this, the regulator has classified industries on the basis of macroeconomic, sector, industry and basic industry indicators.
The regulator has required rating agencies to use this standardized industry classification for the purposes of rating exercise, peer benchmarking, research activities, including research for the economy, industries and businesses, etc.
In a separate circular, SEBI extended the deadline until June 30, 2022 for rating agencies to align their rating scales.
Previously, they had to comply with the rules by March 31.
Under this, rating agencies will have to align their rating scales with the scales prescribed by the guidelines of the respective regulator or financial sector authority in terms of CRA regulations, or in the absence thereof- ci, follow the grading scales prescribed by SEBI.
This decision aims to standardize the use of grading scales.
In cases where a rating scale has not been prescribed by a financial industry regulator or authority, the rating agencies will only use the rating scales prescribed by SEBI from time to time.
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