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SEBI (Credit Rating Agencies) Regulations, 1999

4 questions. Each answer is explained.

Question 1 of 4Practice · Series III-A — Securities Intermediaries Compliance (Non-Fund)

0 right · 0 wrong · 4 to go

Series III-A21. SEBI (Credit Rating Agencies) Regulations, 1999IntermediateApplied caseQuestion reference III-A-142

Question 1 of 4A rated issuer’s repayment capacity materially weakens after the initial rating. What should the rating agency’s process provide for?

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More units in NISM Series III-A

Practise all of NISM Series III-A

Exam format

Questions100 · 1 mark each
Duration120 min · 2 hours
Pass mark60% · 60 of 100 marks
Negative marking25% · 0.25 marks off per wrong answer
Certificate validity3 years · from the date of the examination
Marks for this unitNot published by NISM

NISM Series III-A Securities Intermediaries Compliance (Non-Fund)

Exam rules read on NISM's site on 17 October 2026. Check the current rules on NISM's site (opens in a new tab)

What these answers assume, and when it was last checked

Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.

Rules used across this bank
  • NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
  • The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
  • The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
  • Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
  • Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
  • F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
  • The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
  • Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
  • On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
  • Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
Extra rules for Series VII
  • This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
  • The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
  • Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
  • The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
  • The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
  • Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
  • Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
  • Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
  • A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
  • SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
  • At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
  • A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
Extra rules for Series I
  • The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
  • Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
  • The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
  • Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
  • Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
  • Daily settlement is on T+1 and final settlement is on T+2.
  • NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
  • A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
  • A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
  • The currency segment has no Securities Transaction Tax.

The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 17 October 2026. Timed practice uses the same figures. Study with the official workbook as well.

The written-out answers on this page are hidden while your timed set runs.

All 4 questions on SEBI (Credit Rating Agencies) Regulations, 1999, with answers

  1. Q1What does a credit rating primarily express about a rated debt obligation?

    • Option A. An opinion on full and timely repayment — Correct answer

    • Option B. A guarantee of a rising market price

      Why it is wrong: A credit opinion does not guarantee a higher trading price.

    • Option C. A complete assessment of every investment risk

      Why it is wrong: Credit ratings do not measure every risk an investor may face.

    • Option D. A binding instruction to buy the instrument

      Why it is wrong: A rating is not a binding purchase instruction.

    Answer: A. A credit rating expresses an opinion about the likelihood of full and timely repayment of the rated debt obligation. Remember: A credit rating addresses credit risk rather than guaranteeing an investment outcome.

    Hint, shown before you answer in practice mode: Common mistake: Treating a high rating as protection against every type of loss. Focus on the promise made by a borrower to its lenders.

    III-A-140easyconceptual

    Study this unit

  2. Q2An investor treats a high bond rating as proof that the bond cannot suffer a market-price loss when interest rates rise. What is wrong?

    • Option A. A high credit rating fixes the market price at face value

      Why it is wrong: A credit rating does not fix the bond’s traded price at face value.

    • Option B. A high credit rating automatically converts the coupon to floating

      Why it is wrong: The rating does not rewrite the bond’s contractual coupon terms.

    • Option C. A high credit rating gives an unconditional sale right at cost

      Why it is wrong: The rating does not create an unconditional right to sell without a loss.

    • Option D. A credit rating does not remove interest-rate risk — Correct answer

    Answer: D. A credit rating does not remove interest-rate or secondary-market price risk. Remember: Strong credit quality does not make a bond immune to market-price changes.

    Hint, shown before you answer in practice mode: Common mistake: Confusing low default risk with the absence of all investment risk. Separate the chance of repayment default from changes in market valuation.

    III-A-141mediumapplication

    Study this unit

  3. Q3A rated issuer’s repayment capacity materially weakens after the initial rating. What should the rating agency’s process provide for?

    • Option A. Review only when the original debt has fully matured

      Why it is wrong: Waiting until maturity would fail to address a material change during the rated obligation’s life.

    • Option B. Change only after obtaining the issuer’s approval for a downgrade

      Why it is wrong: The issuer cannot veto an independent rating review by withholding approval.

    • Option C. Rely exclusively on the financial information used for the first rating

      Why it is wrong: A continuing assessment must consider relevant developments rather than freeze the initial information set.

    • Option D. Ongoing monitoring and an appropriate rating review — Correct answer

    Answer: D. The agency should monitor developments and review the rating when relevant changes affect creditworthiness. Remember: Credit ratings need surveillance as the issuer’s ability to repay changes.

    Hint, shown before you answer in practice mode: Common mistake: Treating the initial rating as permanent until the debt matures. Consider whether a rating is a one-time event or an ongoing assessment.

    III-A-142mediumapplication

    Study this unit

  4. Q4Two agencies assign different ratings to the same debt instrument. Does that difference alone prove that one agency committed fraud?

    • Option A. No, different methodologies and judgments can produce different opinions — Correct answer

    • Option B. Yes, regulations require every agency to give an identical rating

      Why it is wrong: The framework does not require all independent opinions to be identical.

    • Option C. Yes, the lower rating must automatically be fraudulent

      Why it is wrong: Being the lower rating does not establish misconduct.

    • Option D. No, because rating agencies have no conduct obligations

      Why it is wrong: Rating agencies still have conduct and due-diligence obligations.

    Answer: A. A difference alone does not prove fraud because agencies may apply different methodologies and professional judgments. Remember: Assess the methodology and evidence before treating a rating difference as wrongdoing.

    Hint, shown before you answer in practice mode: Common mistake: Assuming the higher rating is necessarily correct or the lower one dishonest. Distinguish a difference of professional opinion from evidence of misconduct.

    III-A-143mediumapplication

    Study this unit

SEBI (Credit Rating Agencies) Regulations, 1999: common questions

How many practice questions are there on SEBI (Credit Rating Agencies) Regulations, 1999?

4 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 23 practice topics for NISM Series III-A, which has 150 questions in total.

Are these real NISM Series III-A questions on SEBI (Credit Rating Agencies) Regulations, 1999?

No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.

Does negative marking apply to NISM Series III-A?

Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.

Are these practice questions kept up to date?

Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.

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