SEBI Allows CRAs to Use Expected Loss-Based Ratings for Municipal Bonds

The Securities and Exchange Board of India (SEBI), the capital markets regulator, has approved new credit rating methodologies specifically for municipal debt instruments. This regulatory development will now permit Credit Rating Agencies (CRAs) to utilize expected loss-based approaches when assigning ratings to these instruments. The introduction of these reformed methodologies is a strategic move aimed at deepening and further developing India's municipal bond market by providing more sophisticated and risk-sensitive assessments of the creditworthiness of municipal entities seeking to raise funds through debt offerings.