SEBI's Credit Risk-o-Meter for Bonds Explained: Six Colour-Coded Risk Levels
Bonds and debentures are now sold to retail investors on apps and websites, and the credit rating is often a short code such as AA- or A2 that is easy to skim past. On 7 Oct 2026, SEBI issued a circular that adds a colour-coded "Credit Risk-o-Meter" to debt securities, so that investors can see the credit risk level before they invest. This explainer covers what the circular says, using only the SEBI circular itself.
What SEBI announced
The circular (reference HO/17/11/22(1)2026-DDHS-POD1/I/23092/2026, dated 7 Oct 2026) makes the Credit Risk-o-Meter a mandatory part of:
The offer document
The abridged prospectus
The private placement memorandum
All advertisements of issuers and Online Bond Platform Providers (OBPPs)
The web and mobile platforms of OBPPs
SEBI says the provisions come into force 45 days after the date the circular was issued. By our own count, 45 days from 7 Oct 2026 falls on 21 Nov 2026. Please check the circular for the exact applicability.
Which securities it covers
Annexure-A applies the meter to all listed issues, and all issues proposed to be listed, of non-convertible securities (NCS), commercial papers (CPs), securitised debt instruments (SDIs), security receipts (SRs), and structured debt or market linked debentures (MLDs). It applies whether they are issued through a public issue or a private placement.
The six risk levels and their colours
The meter maps SEBI's standard credit rating symbols (AAA to D) to six risk levels. Each level has a fixed colour.
Risk level (colour) | Long-term rating | Short-term rating |
|---|---|---|
Lowest credit risk (Irish Green) | AAA | A1+ |
Very low credit risk (Chartreuse) | AA+, AA, AA- | A1 |
Low credit risk (Neon Yellow) | A+, A, A- | A2 |
Moderate credit risk (Caramel) | BBB+, BBB, BBB- | A3 |
Moderate risk of default (Dark Orange) | BB+, BB, BB- | A4+ |
High to very high risk of default (Red) | B+ to B-, C+ to C-, D | A4, D |
What must appear below the meter
The circular lists the text that must be shown with the meter:
The name of the credit rating agency (CRA)
The actual credit rating of the security, written out in text
For unsecured debt instruments, the word "unsecured" in bold red text
Some other rules from the circular:
If a security is rated by more than one CRA, the meter must show the lowest rating. All the ratings may still be shown next to it.
If the CRA says the issuer is not cooperating ("INC"), the meter's arrow must point to INC, and the text below must also say so.
The meter shows credit risk only, and issuers and OBPPs must say so clearly.
Rules for online bond platforms
OBPPs have extra duties under the circular:
Show the meter on the bond listing and bond details pages, before the investment action buttons.
Update the meter within 24 hours of receiving a rating change intimation from NSDL or CDSL, using an automated system.
Take ratings only from SEBI-registered CRAs, with no manual overrides, and keep audit trails of every update.
Show the meter in every advertisement that refers to the bond's rating. Monochrome adverts must carry a QR code that links to the colour version.
The two disclaimers
The standard disclaimer that must sit below the meter reads: "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."
For unsecured perpetual bonds such as AT1 bonds, SEBI requires a separate disclaimer. It says the meter does not reflect the structural risks of these bonds, and that they may carry the risk of total loss of invested capital.
Nishi's takeaway
A colour is a quick signal, not the full picture. The meter covers credit risk only. By SEBI's own wording, debt securities also carry market and liquidity risks, and AT1-type bonds carry structural risks that the meter does not show. Read the rating, the rating agency, whether the bond is secured, and the offer document before you put money into any bond.
FAQ
What is SEBI's Credit Risk-o-Meter?
It is a colour-coded meter that shows the credit risk level of a debt security. SEBI introduced it through a circular dated 7 Oct 2026, mapping credit ratings from AAA to D onto six risk levels.
Which documents and platforms must show the Credit Risk-o-Meter?
Offer documents, abridged prospectuses, private placement memorandums, all advertisements of issuers and Online Bond Platform Providers, and the web and mobile platforms of Online Bond Platform Providers.
Which rating does the meter use if a bond has more than one rating?
The meter must reflect the lowest rating. All ratings may still be disclosed alongside the meter, as per the SEBI circular.
Does the Credit Risk-o-Meter show all the risks of a bond?
No. SEBI's disclaimer says the meter is based on the credit risk of the issuer and is not investment advice. Debt securities also carry market and liquidity risks.
Sources
About the author: Nishi Jain is a full-time trader in Jaipur and ex-JioBlackRock.
Disclaimer: Education-only explainer. Not investment advice. No bond or security recommendation is made here. Please do your own research or consult a SEBI-registered adviser before investing.