Small and medium enterprises (SMEs) have limited access to institutional finance, with financial institutions considering them a relatively risky proposition. Many are, therefore, unable to scale up and reap the benefits of size. CRISIL has been in the business of rating SMEs since 2005, in a bid to help them gain greater access to bank loans and instil a sense of financial discipline in them. Ramraj Pai, director, SME Ratings, CRISIL, tells Vikas Sharma what the organisation is doing to help SMEs get rated. Edited excerpts:
How will credit rating help SMEs? How does CRISIL differ from other rating agencies?
A CRISIL rating gives the enterprise as well as bankers and financiers an independent third party opinion on its performance and creditworthiness. It instils a sense of financial discipline and transparency among enterprises. The credit rating helps micro, small and medium enterprises (MSMEs) establish credibility in front of lenders, reduce interest rates as well as increase access to funds from banks. CRISIL has tied up with over 30 banks across India, with more than 14 banks providing interest rate concessions to SMEs that are rated high.
The rating helps the financing body to pursue lending to SMEs with greater confidence. In short, it may be used as an additional tool by the banker to know the borrower better and make better-informed financing decisions. In addition to these financial benefits, MSMEs can also use the rating as a brand -building tool to enhance confidence and credibility among suppliers and customers. They can use the rating to increase their credibility while entering into new tie-ups or joint ventures or relationships with foreign players.
CRISIL is India’s first and largest rating agency, with a dominant market share. It is also the world’s fourth largest rating agency globally. We have a deep insight into all the sectors of the Indian economy and a very strong team of expert analysts, which ensures that we come out with credible and unbiased analysis and opinion.
What are CRISIL’s plans for northern-region SMEs, especially those in Punjab and Haryana?
CRISIL plans to promote the concept of rating across the country. Punjab and Haryana, as well as the rest of north India, are crucial for us and we have a strong team to cover these states.
Are you conducting awareness programmes to sensitise SMEs to the benefits of getting rated?
CRISIL organises about five to eight workshops every fortnight across the country. These workshops are usually conducted in association with the local National Small Industries Corporation (NSIC) offices, industry associations and trade bodies. In addition, we also conduct workshops for MSME customers of different banks from time to time. We also participate in seminars and conferences organised by various chambers of commerce. We also take part in numerous exhibitions and trade fairs.
How many SMEs in Punjab and Haryana have already been rated?
Ever since we started rating SMEs in 2005 we have received a very good response. Overall, we have rated more than 8,500 MSMEs across the country until November 2009. Speaking of Punjab and Haryana, we have rated more than 560 and 180 units in these two states respectively.
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Does CRISIL have offices in Punjab and Haryana?
We have a Business Centre at Ludhiana and this centre covers Jammu and Kashmir, Himachal Pradesh and Punjab. Haryana is managed from our New Delhi office.
Punjab being an important hub for SMEs, what are CRISIL’s expectations from the market?
Punjab has a good concentration of MSMEs. We intend to intensify our efforts in the state and reach out to more of them.