SEBI's Credit Risk-o-Meter for bonds, explained
SEBI's Credit Risk-o-Meter is a colour-coded scale that places a bond's credit rating at one of six levels, from lowest credit risk to high to very high risk of default. Under a SEBI circular dated 7 October 2026, it becomes a required part of offer documents, issuers' and online bond platforms' advertisements, and online bond platforms' websites and apps from 21 November 2026. It shows credit risk and nothing else. This post goes through the circular: what the meter covers, how to read the lines printed under it, what happens when a rating changes, and what it leaves out.
Key points
- SEBI's Credit Risk-o-Meter places a debt security's credit rating at one of six levels, each with its own colour, from lowest credit risk to high to very high risk of default.
- A SEBI circular dated 7 October 2026 makes it part of offer documents, issuers' and online bond platforms' advertisements, and online bond platforms' websites and apps, from 21 November 2026.
- When a bond has ratings from more than one agency, the meter uses the lowest one, and the text below it names the agency and the actual rating.
- The meter shows credit risk only. It does not show liquidity or interest-rate risk, it changes when the rating changes, and it is not a recommendation.
What is the Credit Risk-o-Meter?
It is a picture of credit risk, the chance that the issuer can't pay interest or repay on time. SEBI's circular says the meter is meant to help investors assess credit risk through a colour-coded picture before they invest.
The meter does not create a new rating. Paragraph 2.4 of the circular's Annexure-A maps the rating symbols already used by credit rating agencies onto six levels:
| Long-term rating | Short-term rating | Level |
|---|---|---|
| AAA | A1+ | Lowest credit risk |
| AA+, AA, AA- | A1 | Very low credit risk |
| A+, A, A- | A2 | Low credit risk |
| BBB+, BBB, BBB- | A3 | Moderate credit risk |
| BB+, BB, BB- | A4+ | Moderate risk of default |
| B+, B, B-, C+, C, C-, D | A4, D | High to very high risk of default |
Each level has a fixed colour, running from green at the lowest-risk end to red at the other. The circular fixes the colour code for each level.
A question people often ask is whether the meter replaces the rating. It doesn't. It is a way of drawing the rating, and the rating itself is still printed with it, as the next sections explain. Our section on how credit ratings work covers what the symbols mean.
Where will the meter appear, and from when?
Paragraph 1 of the circular makes the meter a mandatory part of five things: the offer document, the abridged prospectus, the private placement memorandum, all advertisements of issuers and online bond platform providers (OBPPs), and the web and mobile platforms of OBPPs.
It covers a wide range of debt. Annexure-A applies it to all listed issues, and issues proposed to be listed, of non-convertible securities (which include NCDs), commercial papers, securitised debt instruments, security receipts and market-linked debentures. That holds whether the securities are sold in a public issue or placed privately.
The start date comes from paragraph 5, which says the circular comes into force 45 days after it was issued. Counted from 7 October 2026, that is 21 November 2026.
Say you are reading the offer document of a new NCD issue that opens after that date. The meter should sit in the document itself, with the lines described below printed under it.
What does the text under the meter tell you?
The colour is only half of it. Paragraph 2.6 requires the issuer or platform to print, in text below the meter, the name of the credit rating agency and the bond's actual credit rating. If the bond is unsecured, the word "unsecured" appears in bold red. Unsecured means no specific assets back the bond.
That text is worth reading as closely as the colour. Each level covers a band of ratings, so the actual rating tells you where in the band the bond sits. The "unsecured" line tells you something the colour does not: that no specific assets back the bond, which matters for what bondholders can claim if the issuer defaults. Our section on secured, unsecured and seniority explains why that matters.
Two more rules shape what you see:
- More than one rating. If several agencies rate the bond, the meter uses the lowest rating (paragraph 2.7). All the ratings may be shown next to it.
- "Issuer not cooperating". Where a rating agency says the issuer is not cooperating with it, the meter points to a separate "Issuer not cooperating" mark instead of a level, and the text below says so (paragraph 2.10).
Take a bond rated by two agencies, where one rating falls in a lower band of the table than the other. The meter shows the level of the lower rating. The text below can list both ratings, and the agency names tell you which is which.
What happens when a bond's rating changes?
The meter moves with the rating. It is based on a rating, and a rating is an agency's opinion that can change over a bond's life.
The circular sets out how quickly that has to show. OBPPs must take the meter only from ratings given by SEBI-registered credit rating agencies (paragraph 2.13.1). They must update it within 24 hours of being told of a rating change by the depositories, NSDL or CDSL (paragraphs 2.12.1 and 2.13.2). Manual overrides of the meter's level are prohibited, and every update has to leave an audit trail (paragraphs 2.13.3 and 2.13.4).
A common worry is that a meter moving one level towards red means the issuer has missed a payment. Not by itself. It means a rating agency has changed its rating. What the change means for a particular bond is in the agency's rating action and the issuer's own disclosures, not in the colour.
What doesn't the meter show?
The circular is plain about its limits. Paragraph 2.11.1 requires this caution with the meter:
"The Credit risk-o-meter is based on evaluation of the credit risk of the issuer and does not constitute investment advice or a recommendation to invest. Investments in debt securities are also subject to market and liquidity risks."
In practice, that leaves out a lot:
- Liquidity risk: how easily you can sell before maturity. A listed bond may find few buyers.
- Interest-rate risk: how the price moves when market rates change. Longer maturities usually move more in price for the same change in rates.
- Suitability: the meter says nothing about whether a bond fits anyone's needs, and it is not a recommendation.
- The bond's terms: maturity, payout dates, call options and seniority sit in the documents, not in the colour.
For unsecured perpetual bonds, such as AT1 bonds, paragraph 2.11.2 adds a second caution. It says the meter "does not reflect the unique structural risks" of these bonds and that they "may carry the risk of total loss of invested capital."
Hypothetical example, not a real bond and not a forecast. Picture two bonds at the same level on the meter. One is secured and matures in two years. The other is unsecured and matures in ten. The meter puts their credit risk in the same band; the "unsecured" line and the maturity date show how differently they are built.
Our page on risks to check lists what to look at beyond credit risk.
How can you read the meter alongside the rest of a bond's details?
One way is to treat the meter as the first line of a longer read, not the last. A useful order:
- Note the level, and remember it reflects the lowest rating if there are several.
- Read the text under it: the agency, the actual rating and whether the word "unsecured" appears.
- Check for an "Issuer not cooperating" mark and any second caution for perpetual bonds.
- Then read the terms: maturity, payout schedule, security, and whether there are call or put options.
- Finally, read the issuer's offer document or information memorandum, which is where the full risk factors are.
People sometimes ask whether two bonds showing the same colour leave anything else to check. Yes, nearly everything except the credit rating band. The colour narrows one question. It does not answer the others.
If you are new to the basics, our post on what a bond is covers face value, coupon and maturity. The explainer on the Credit Risk-o-Meter on our Learn page has a short summary of the scale. To see how bond terms are laid out, the bond list shows each bond's security and maturity, you can compare up to 3 bonds side by side, or you can ask Parmbh AI what a term means.
We explain bonds; we don't tell anyone which one to buy.
Sources
- Securities and Exchange Board of India, Introduction of Credit Risk-o-Meter as an additional disclosure mechanism for debt securities, circular HO/17/11/22(1)2026-DDHS-POD1/I/23092/2026, 7 Oct 2026 (checked 23 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.
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