Crisil rolls out SME rankings

Small and medium enterprises (SMEs) will now be able to raise finance at cheaper interest rates with Crisil launching its rating for the SME segment.

From the lender's perspective, the rating aims at providing commercial banks the ability to differentiate across SME borrowers and decide on appropriate terms of lending.

According to this rating programme, SMEs would be rated on a scale of one to eight, with scale one indicating the highest credit quality and the scale eight, hinting at default possibilities. The ratings assigned to SMEs would also function as a self-improvement tool for them, said R Ravimohan, managing director and CEO, Crisil.

With the Centre announcing an SME policy, the rating service introduced by Crisil today for SMEs proposes to involve management interaction, customer, supplier and banker enquiries within the rating procedure, said Roopa Kudva, executive director and chief rating officer.

D Thyagarajan, director of SME ratings, said market players dealing with the SME sector are aware of the inherent risks within the sector and, hence, are in need of an indication of relative credit quality among SMEs.

Accordingly, the level of credit worthiness is to be adjudged in relation to other SMEs. Entities belonging to various ownership categories "" proprietorships, partnerships and companies""are to be considered eligible for the rating.

Although the rating would have an initial validity of one year, the periodicity will be reviewed later.