Bond credit ratings in India: what AAA to D mean
A bond's credit rating is a rating agency's opinion on how likely the issuer is to pay interest and repay principal on time. In India, SEBI's standard long-term scale runs from AAA, which it describes as the "highest degree of safety regarding timely servicing of financial obligations", down to D, which means the bond is in default or expected to be soon. A rating is not a guarantee, and it can change. This post covers each step of the scale, the signs and labels around a rating, and what a rating leaves out.
Key points
- A credit rating is a rating agency's opinion on how likely it is that a bond's interest and principal are paid on time.
- SEBI sets one standard set of symbols and definitions for all registered rating agencies. On the long-term scale it runs from AAA down to D, with the agency's name in front.
- Plus and minus signs, used from AA to C, show where a rating sits within its category.
- A rating is an opinion, not a guarantee of payment and not a recommendation. It can be raised, lowered or withdrawn, and it says nothing about a bond's price or whether you can sell it.
What does a bond credit rating mean?
It is an agency's view of one thing: whether the issuer will make its payments on time. Every definition from AAA to C on SEBI's long-term scale is about "timely servicing of financial obligations", so a rating is about paying on time, not only paying eventually.
The symbols are not each agency's own invention. SEBI's Master Circular for Credit Rating Agencies of 11 July 2025 says standard symbols and definitions were devised in consultation with the agencies, and that registered agencies must use them for new ratings and reviews. The agency's name goes in front of the symbol, which is why ICRA's own scale page writes them as [ICRA]AAA, [ICRA]AA and so on.
A reader often asks whether a rating is about the company or about the bond. There are two kinds. A rating on a security (a bond or an NCD) uses the scale in Annexure 2 of the master circular. An issuer rating uses Annexure 8 and, in SEBI's words, "indicates the degree of safety of the issuer" for all its debt. The wording of the two scales is almost the same, so it helps to check which of the two a document is quoting.
What do AAA, AA, A and BBB mean, and what comes below?
Here is SEBI's standard wording for long-term securities, meaning those with an original maturity of more than one year. The phrases are quoted from Annexure 2 of the master circular.
| Symbol | Safety or risk of default | Credit risk |
|---|---|---|
| AAA | "highest degree of safety" | "lowest credit risk" |
| AA | "high degree of safety" | "very low credit risk" |
| A | "adequate degree of safety" | "low credit risk" |
| BBB | "moderate degree of safety" | "moderate credit risk" |
| BB | "moderate risk of default" | (not stated) |
| B | "high risk of default" | (not stated) |
| C | "very high risk of default" | (not stated) |
| D | "in default or are expected to be in default soon" | (not stated) |
Notice where the wording turns. From AAA to BBB, SEBI describes a degree of safety. From BB down, it describes a risk of default. Even AAA carries "lowest credit risk", which is not the same as no credit risk.
We checked one agency's own published scale against this. ICRA's rating-scale page, read on 27 October 2026, gives the same definitions word for word, with [ICRA] in front of each symbol.
What do the plus and minus signs mean?
They show where a rating sits within its category. SEBI's note says modifiers "+" and "-" can be used from AA to C, and that they "reflect the comparative standing within the category". ICRA's page puts it simply: AA+ is one notch higher than AA, and AA- is one notch lower.
So there is no AAA+ and no D-. Counting every symbol and modifier, the long-term scale has 20 steps: AAA; then AA, A, BBB, BB, B and C, each with a plus, plain and minus form; then D.
A common question is whether A+ is closer to AA- or to A. It sits one notch below AA- and one notch above A. The order runs AA+, AA, AA-, A+, A, A-, and so on down the scale.
Is A1 the same as A?
No, and this one trips people up. A1 to A4 belong to a different scale, for short-term securities with an original maturity of up to one year (Annexure 3). SEBI describes A1 as a "very strong degree of safety regarding timely payment" and A4 as a "minimal degree of safety". Short-term ratings take only a plus sign, as in A1+, and D on this scale means default or expected default on maturity.
Picture a bond page that shows A1+ next to one bond and A+ next to another. They look alike, but they come from different scales and cannot be read against each other.
Where is the line between investment grade and below?
SEBI's master circular uses the term without defining it, but its format for agencies' half-yearly rating summaries (Annexure 20) lists AAA, AA, A and BBB under "Default from Investment Grade". Read with the scale, that makes the BBB category, down to BBB-, the lowest investment grade category. Ratings from BB+ down to C are below investment grade, and D means in default or expected to be soon. Our section on credit ratings draws the line in the same place.
The line matters in SEBI's own rules too. If an issuer stops cooperating with a rating agency for more than six months, the master circular (para 11.9.1) says the agency must downgrade the rating to non-investment grade, marked as non-cooperative.
What do labels like Provisional, CE, SO and outlook mean?
Ratings often carry extra words:
- Provisional: placed before the symbol when the rating depends on steps not yet completed, such as signing the debenture trust deed or putting third-party support in writing (para 13.1).
- (CE): the security has an explicit credit enhancement, such as a standby letter of credit or other support from a third party (para 14.1, Annexures 9 and 15). The agency's press release must show the rating both with and without that support (para 14.3).
- (SO): a structured finance instrument, one whose payments come from a securitisation (para 5.4, Annexure 4).
- ISSUER NOT COOPERATING: the issuer has not cooperated with the agency. The agency must show this suffix in the same font size and explain under it that the rating rests on the information available to it (para 11.5).
Then there is direction. A rating outlook (Stable, Positive or Negative) is, in the master circular's words, the agency's "view on the expected direction of the rating movement in the near to medium term". A rating watch (with positive, negative or developing implications) is the agency's view of the direction in the short term. Neither is a rating change, and neither tells you what will happen.
Picture a rating written as Provisional AA (CE) with a Negative outlook. Read in order: the rating is not final yet, it relies on outside support, and the agency has said which way it sees the rating moving.
What doesn't a credit rating tell you?
It is not a promise. A rating measures how likely timely payment is, in the agency's opinion; it does not guarantee it, and bonds at any rating can default. It is also not a recommendation to buy, sell or hold.
It can change. Agencies review ratings, and a rating can be upgraded, downgraded or withdrawn. A bond can also carry ratings from more than one agency (the master circular has separate withdrawal rules for that case), and they need not match.
It leaves out other risks. A rating is about the issuer paying on time. It does not measure how much a bond's price can move when interest rates change, or whether there will be a buyer if you want to sell before maturity. Our list of risks to check covers both.
When reading a bond's details, it helps to look at the issuer, the rating, the security and the maturity before looking at the yield.
Where can I read the reasons behind a rating?
In the agency's press release. The master circular sets a standard format for these (para 10.1.1). The agency must assign an outlook and state it there (para 10.1.3), except in some cases where it may leave one out, among them short-term ratings, ratings in the C and D categories and ratings on watch (para 10.1.4). A press release on a review must also show the rating history of the issuer's securities rated by that agency over the past three years (para 10.1.6). That history shows whether a rating has moved, and when.
Where can I see ratings on Parmbh?
The bond list shows the credit rating listed for each bond, and the compare page puts the ratings of up to three bonds side by side with their maturity and other terms. Our Learn section explains secured and unsecured bonds. You can also ask Parmbh AI general questions about rating symbols and labels.
We explain bonds; we don't tell anyone which one to buy.
Sources
- Securities and Exchange Board of India, Master Circular for Credit Rating Agencies, SEBI/HO/DDHS/DDHS-POD2/P/CIR/2025/101 (paras 5.1 to 5.5, 10.1.1 to 10.1.6, 11.5, 11.9, 12.4, 13.1, 14.1 to 14.3 and Annexures 2, 3, 4, 8, 9, 15 and 20), 11 Jul 2025 (checked 27 Oct 2026)
- ICRA, ICRA Rating Scale: long-term, short-term and issuer rating scales (page shows no date), 27 Oct 2026 (checked 27 Oct 2026)
This post is for learning only. It is not investment advice or a recommendation to buy, sell or hold any bond, and it does not take your circumstances into account. Bonds carry risks, including the risk that the issuer does not pay on time or at all. Yields are not guaranteed, and figures are as of the dates shown. Parmbh earns a commission from Aspero or our partners when you invest through us. It is included in the price or terms you get from Aspero or the partner. We never hold your money. Before you invest, read the issuer’s documents and speak to a SEBI-registered adviser.
Spotted an error in this post? Email support@parmbh.com with the post title and what looks wrong.