Why in News?
SEBI proposed a mandatory colour-coded Credit Risk-o-Meter to help investors quickly understand the default risk of debt securities.
How will the Risk-o-Meter work?
- The proposed meter uses six colour-coded levels ranging from low to very high credit risk.
- Issuers and online bond platforms would display it in offer documents, advertisements and digital interfaces.
- If multiple credit ratings exist, the meter would use the lowest rating, giving investors a conservative view of risk.
Exam Connect
- SEBI → securities-market regulator
- Debt security → instrument through which an investor lends money to an issuer
- Credit risk → risk that the borrower may fail to repay