Credit rating to speed up SME funding

The proposal to introduce voluntary rating for SMEs will give a shot in the arm to the small and medium enterprises (SME) sector, J Suri, chairman, finance, capital markets and foreign investments, Bangalore Chamber of Industry and Commerce (BCIC), told a seminar on 'Financing for SMEs: The New Paradigm'.

This process will give them a chance to obtain credit on better terms, many participants felt.

Credit rating will help in the risk assessment of small scale units by the lender, said an ICRA official, adding that this will influence the cost of credit. But, the need for rating won't be compulsory. This is in keeping with the WTO norms. "The rating will help companies raise funds much more easily," he added.

The credit flow to SMEs rose from Rs 17,000 crore in 1991 to Rs 53,000 crore in 2004. This was established by a recent FICCI survey.

"The policy initiatives of the government and the RBI had helped raise the credit disbursal," said Devaki Muthukrishnan, regional director, RBI, Bangalore.

The policy changes made on the recommendations of various committees periodically has helped widen the coverage and has speeded up the credit disbursal process, she added.