Master Circular for Credit Rating Agencies (CRAs) provides that in addition to the standardized rating
scales prescribed for various instruments, an Expected Loss (EL) based Rating Scale may be used by CRAs for ratings of projects/ instruments associated with infrastructure sector. Pursuant to deliberations with various stakeholders, including the Corporate Bonds and Securitisation Advisory Committee (CoBoSAC), it is felt
that EL Ratings, when used along with standardized rating scale/Probability of Default (PD) Rating, can better reflect the recovery prospects of municipal bonds.
Further, Urban Local Bodies/ Municipalities issue bonds primarily for the creation/development of infrastructure. Therefore, it has been decided that CRAs may, in addition to the standardised rating scale, extend the EL based Rating Scale for rating of Municipal Bonds which are issued for financing infrastructure assets.
This circular shall be applicable with immediate effect.
