An substantial part of the Indian economy is played by the MSME sector. For small enterprises, the rapidly shifting economic environment has created both opportunities and challenges. Despite all the chances and improvements, MSME enterprises are nevertheless vulnerable to losses, and many end up shutting down the business early. The Performance and Credit Rating scheme has been developed by the government to stop such incidents from happening and to provide them with appropriate advice regarding technology, management, and financial management.
In collaboration with industry associations, the Indian Banks’ Association (IBA), and rating agencies, the Performance & Credit Rating Scheme was developed with the goal of educating small scale units, or what are now known as micro & small enterprises, about the strengths and weaknesses of their current operations and giving them the chance to strengthen their organizational strengths.
The Scheme has received positive reviews, from the different parties involved. Indian Banks’ Association (IBA) informed its member banks about the programme. That the government hopes the rating product to help SSI units in obtaining credit from banks more quickly and in effectively terms. The scheme’s rating process is run through accredited rating organizations.
The Performance & Credit Rating Scheme’s nodal agency is National Small Industries Corporation (NSIC). The plan allows for the rating of MSMEs by rating organizations that are registered with SEBI and designated as External Credit Assessment Institutions (ECAI) by the RBI.
After receiving an application, a credit rating agency would evaluate the company, conduct a site inspection, and generate a credit rating report. The unit’s performance and credit worthiness would be combined to determine the credit rating. Operational, financial, commercial, and management risk are all variables taken into account in the MSMEs assessment system. The MSME credit rating report can be broken down into the following three sections:
The fee that must be paid to the rating agencies will be determined by the MSMEs’ three different categories of turnover. The table below shows the percentages of Turnover and Ministry of MSME contributions to the fee levied by the Rating Agency.
Turnover |
Fees |
Sales turnover of up to INR 50 lacs |
75% of the rating agency’s fee up to a maximum of INR 15,000. |
Over INR 50 lakh to INR 200 lakh in sales turnover |
75% of the rating agency’s fee, up to a maximum of INR 30,000. |
Over Rs. 200 lacs in sales turnover |
75% of the rating agency’s fee, up to a maximum of Rs. 40,000. |
The rating acts as a reliable third party assessment of the qualifications and creditworthiness of MSME. It makes it possible for MSMEs to obtain financing from banks and other financial organizations with comparatively little difficulty and at advantageous interest rates. Rating also makes it easier for vendors and buyers to evaluate the skills and capacity of MSMEs before deciding whether to finalize a purchase agreement with them, which supports the overall expansion of the MSME sector.
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