RBI Directive On Bank Deposit Ratings Creates Compliance Challenge For CRAs

New Delhi, Aug 18 (KNN) The Reserve Bank of India (RBI) has asked credit rating agencies (CRAs) not to identify the central bank as the regulator of bank deposits in their rating communications.

RBI Directive Creates Compliance Challenge

The reported instruction, issued to rating agencies around 10 days ago, has created a potential compliance conflict with SEBI’s disclosure requirements introduced earlier this year.

SEBI’s February 10, 2026 circular requires CRAs to identify the regulator overseeing financial instruments regulated by other financial-sector authorities in rating reports, press releases and rationales. 

CRAs must also make separate disclosures and clarify that SEBI’s investor-protection and grievance-redressal mechanisms do not apply to such activities, reported Economic Times.

Rating Agencies Seek SEBI Guidance

The latest RBI instruction has prompted rating agencies to approach SEBI for guidance on how to comply with the two regulatory requirements, the report said.

The development does not mean the RBI has directed CRAs to immediately stop rating bank deposits. However, if agencies are unable to identify the regulator for the rated instrument while meeting SEBI's disclosure requirements, they could eventually face difficulties continuing to issue such ratings.

Role of Bank Deposit Ratings

Deposit ratings provide an independent assessment of the credit risk associated with a bank's deposit obligations. Rating agencies typically assess factors including capital adequacy, asset quality, management strength, earnings and liquidity while assigning such ratings.

While deposit ratings may have limited relevance for retail depositors, they can be important for institutional and corporate depositors that follow internal policies requiring surplus funds to be placed with banks meeting specified rating thresholds.

Deposit Insurance Remains Unchanged

Any discontinuation of deposit ratings, however, would not by itself indicate a change in the safety of bank deposits.

Eligible deposits continue to be insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs 5 lakh per depositor per bank, including applicable interest, subject to prevailing rules.

Regulatory Clarity Awaited

The immediate concern is therefore the possible loss of an independent credit-risk indicator for depositors and institutions comparing banks.

The continuation of bank deposit ratings could depend on the guidance issued by SEBI and any further clarification from the RBI. For now, the issue remains a regulatory uncertainty rather than a discontinuation of bank deposit ratings.

(KNN Bureau)