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MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022
Performance and Credit Rating

Scheme for Micro & Small

Enterprises

(An initiative by Ministry of

MSME)

Source of the Article:
AIDE MEMOIRE ON LENDING TO MICRO, SMALL & MEDIUM ENTERPRISES SECTOR (1st Edition)
published by the erstwhile Banking, Financial Services and Insurance Department of The Institute of Cost
Accountants of India

Introduction turnover of the units.
The performance and credit rating scheme was
formulated in consultation with industry associations, The Reserve Bank of India (RBI} also recognized
Indian Banks’ Association (IBA) and rating agencies, the scheme at the time of informing the policy package
with the objective of creating awareness amongst small forstepping up credit to small & medium enterprises.
scale units (now known as micro & small enterprises) In the year 2005, RBI had informed all banks that
about the strengths and weaknesses of their existing ‘The National Small Industries Corporation (NSIC)
operations and to provide them an opportunity to has recently introduced a credit rating scheme for
enhance their organizational strengths. The Scheme encouraging SSI units to get themselves credit rated
which has been launched in April, 2005 has been well by reputed credit rating agencies. Banks may consider
appreciated by the various stakeholders. Indian Banks these ratings as per the availability and wherever
Association (IBA) circulated the scheme among its appropriate, structure their rates of interest depending
member banks mentioning that the Government expects on the ratings assigned to the borrowing SME Units’.
the rating product to help SSI units in accessing credit RBI reiterates these guidelines every year vide its
from banks faster and on better terms. Rating under Master Circular.
the Scheme is being carried out through empaneled
rating agencies i.e. CRISIL, ONICRA, ICRA, Objective
SMERA, Brickwork, India Ratings (earlier known as The main objective of the scheme Is to provide a
FITCH) and CARE. The rating methodology under the trusted third-party opinion on the capabilities and
Scheme is ag combination of credit and performance creditworthiness of the micro & small enterprises
factors including parameters measuring operational, (MSEs) so as to create awareness amongst MSEs about
fi nancial, business and management risks. A uniform the strengths and weakness of their existing operations.
rating scale, covering the combination of credit and This is to provide them an opportunity to improve
performance factors, is prescribed under the scheme, and enhance their organizational strengths and credit
which is being followed by all empaneled rating worthiness, so that they can access credit at cheaper
agencies. Micro & small enterprises are at liberty to rates and on easy terms. The scheme Is also to facilitate
select any of the rating agencies. The entire process them in increasing their acceptability from the banks/
of rating is to be completed by the rating agency in fi nancial institutions, customers/ buyers and vendors.
a month from the date of receipt of all information
from the applicant unit. The existing provision under Strategy
this Scheme envisaged that the fee payable by MSE The strategy adopted for implementation of the
to the rating agencies is subsidized upto 75% of the scheme Is explained below:
fee, which is categorized into three slabs based on the (i) NSIC is the nodal agency for implementing the

The Institute of Cost Accountants of India 49