If you invest through Online Platform Providers (OBPPs), a new risk-o-meter will help you analyze the credit risk of corporate bonds and other debt instruments.
According to a circular released on 7 October, the meter will be mandatory in offer documents, private placement memorandums, advertisements and on OBPPs’ web and mobile platforms. It will map credit ratings to six colour-coded credit-risk levels.
The provisions may come into force on 21 November 2026, “45 days after the circular was issued.” Here’s what investors need to know and how to read the risk-o-meter.
What are the six risk-o-meter levels?
View full Image
The risk-o-meter may be seen as a traffic light for the credit risk of a bond. SEBI has translated credit ratings into six colour bands, from green for the lowest credit risk to red for high to very high risk of default, including D, said Vishal Goenka, Co-Founder, IndiaBonds.
For retail investors, the easiest way to read it is as a credit-risk ladder, not a recommendation to buy or avoid a bond, said Nishchay Nath, Founder & CEO, BondScanner.
| Risk-o-Meter level | Credit rating range | Short-term rating symbols |
| Lowest credit risk | AAA | A1+ |
| Very low credit risk | AA+, AA, AA− | A1 |
| Low credit risk | A+, A, A− | A2 |
| Moderate credit risk | BBB+, BBB, BBB− | A3 |
| Moderate risk of default | BB+, BB, BB− | A4 |
| High to very high risk of default | B+, B, B−, C+, C, C−, D | A4, D |
*Source: SEBI
According to the SEBI circular, issuer/ OBPPs must display the credit rating agency’s name and the bond’s actual credit rating below the meter. If the bond is unsecured, “unsecured” must be clearly shown in bold red text.
Investors should also watch for rating changes, which OBPPs must communicate within 24 hours of receiving the update. Short-term ratings such as A1+, A1, A2, A3 and A4 indicate the issuer’s ability to meet short-term debt obligations, generally those maturing within one year.
“A rating only indicates the issuer’s ability to repay. It does not tell investors whether a bond is attractive at its current price or yield. A lower-rated bond may offer a higher return to compensate for higher credit risk. Investors should therefore also assess the issuer’s financial position, maturity, security structure and liquidity,” Nath mentioned.
Is this similar to the risk-o-meter used for mutual funds?
Goenka said the format is familiar, but the purpose is narrower. The meter reflects the risk level of an entire scheme, whereas this one captures only credit risk – the likelihood of the issuer defaulting.
Investors should use it as a first filter, and then check 3 things: the maturity against their investment horizon, the rating shown below the meter, and whether the bond is secured or unsecured.
For retail investors seeking steady income, AAA and AA-rated bonds are generally the lower-credit-risk segment, while A-rated bonds can offer additional yield with higher risk, he explained.
What are the different risks in bonds and debt instruments?
Nath explained that the bonds carry several risks that do not move together:
- Credit or default risk: This is the risk that the issuer fails to pay the interest or return the principal when it is due. The risk-o-meter captures only credit risk, by mapping the bond’s existing credit rating to SEBI’s six-level colour scale.
- Interest-rate risk: When market rates move, the price of an existing bond changes. This matters most for longer-maturity bonds, whose prices are more sensitive to rate moves.
- Liquidity risk: This is about how easily investors can find a buyer if they want to exit.
- Market risk: A bond’s price can also move with broader economic and market conditions, independent of anything specific to the issuer.
What does ‘Issuer Not Cooperating’ rating mean?
SEBI mentioned that where a credit rating agency (CRA) mentions “Issuer Not Cooperating” (INC), the risk-o-meter must be displayed in a specified manner.
View full Image
The tag means the rating agency has not received the information or cooperation needed to properly assess the issuer. Investors should treat it as a reason to pause before considering this bond, Nath said.
Goenka advised investors to prefer transparent issuers. If they still consider such a bond, they should check the issuer’s latest financial results and exchange disclosures, review debenture trustee reports, and look for any history of payment delays.
Which debt instruments will carry a risk-o-meter?
According to a SEBI circular, the risk-o-meter provisions will apply to all listed and proposed-to-be-listed issuances of Non-Convertible Securities (NCS), Commercial Papers (CPs), Securitised Debt Instruments (SDIs), Security Receipts (SRs), and Structured Debt/Market-Linked Debentures (MLDs), whether issued through a public issue or private placement.
Among the instruments covered, NCS or corporate bonds are the most accessible to retail investors, particularly as face values move towards ₹10,000. SDIs are also covered, while CPs, MLDs and SRs are largely institutional because of their structure and ticket sizes, Goenka said.
Corporate bonds span the full rating range, making the meter particularly useful. Bonds from PSUs, banks and top-tier corporates generally sit in the lowest to very low credit risk categories, which makes them sound building blocks for a retail portfolio, he added.
Nath said that a highly rated corporate bond can have a relatively low credit-risk classification, while a lower-rated bond can sit much higher on the risk-o-meter despite bearing the same broad type of security. While the risk-o-meter helps assess credit risk, the issuer, yield, maturity, structure, and liquidity help evaluate the investment.
“Government securities and Sovereign Gold Bonds are sovereign-backed, so this meter is not the relevant lens for them,” Goenka said.