SEBI Proposes Colour-Coded Credit Risk-O-Meter For Debt Securities To Help Retail Investors
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SEBI has proposed a colour-coded Credit Risk-o-Meter for debt securities. The framework will link credit ratings to six visual risk levels and require their display across offer documents and online bond platforms. Read more.
The Securities and Exchange Board of India (SEBI) has proposed a visual risk indicator for debt securities that maps existing credit ratings to six colour-coded levels, making it easier for retail investors to assess credit risk without decoding alphanumeric rating scales.
In a consultation paper issued on Thursday, the regulator said conventional ratings such as AAA, AA+ and BBB- may not be easily understood by a large section of investors.
The proposed ‘Credit Risk-o-Meter’ would translate those ratings into a standardised colour scale displayed across offer documents, private placement memorandums, advertisements and online bond platforms. Public comments are invited until 03 September 2026.
How The Scale Works
The six levels run from the safest to the most risky:
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AAA-rated securities: Lowest credit risk, displayed in Irish Green.
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AA+, AA and AA- rated securities: Very low credit risk, displayed in Chartreuse.
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A+, A and A- rated securities: Low credit risk, displayed in Neon Yellow.
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BBB+, BBB and BBB- rated securities: Moderate credit risk, displayed in Caramel.
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BB+, BB and BB- rated securities: Moderate risk of default, displayed in Dark Orange.
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B+ to D rated securities: High to very high risk of default, displayed in Red.
Rules Around Display
The actual credit rating and the name of the rating agency must appear below the meter at all times. Where a security carries ratings from more than one agency, the meter must reflect the lowest of those ratings while all ratings are disclosed alongside it.
Online bond platform providers (OBPPs) must update the meter within 24 hours of any rating change and cannot manually override the classification. Any change must be communicated to investors immediately.
Unsecured debt instruments must carry the word ‘unsecured' in bold red text below the meter. Unsecured perpetual bonds such as Additional Tier 1 bonds require a separate disclaimer flagging the possibility of total loss of invested capital.
SEBI has been clear that the meter indicates only credit risk. It does not constitute investment advice. Market and liquidity risks in debt securities remain separate considerations.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
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At Kotak Neo, she drives content strategy for neoshorts, Kotak News Desk, and Investing Guide.
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