SEBI has introduced a colour-coded credit risk indicator for debt securities, giving retail investors a simple visual cue on default risk.

The circular, issued on October 7, mandates a six-level scale ranging from Irish Green for AAA, the lowest risk, to Red for B-plus to D, the highest risk. Each level is tied to a standard credit rating bracket.

Issuers will have to display the risk-o-meter in offer documents, abridged prospectuses, advertisements and on online bond platforms. Where a security carries multiple ratings, the lowest rating will be used. Unsecured instruments must be marked in bold red.

The move is aimed at helping non-expert investors judge risk without parsing complex rating reports. Mis-selling of debt products has been a concern for the regulator, especially after defaults in some high-yield bonds.

The new rules come into force 45 days after issuance. Industry officials said the colour scale mirrors the familiar equity risk-o-meter but is calibrated for credit risk, covering default likelihood, liquidity and possible loss of principal.