Centre asks banks to set up rating agency for SSIs

The Centre has sounded out public sector banks about floating a credit rating agency to exclusively assess the credit worthiness of small scale industry (SSI).

The need to start an agency has been felt as SSIs cannot afford the fees charged by the big four rating agencies "" Crisil, Icra, Care and Fitch.

The availability of credit and the interest rate charged to SSIs hinges on their credit worthiness. In this regard the credit assessment made by a agency could facilitate the process of obtaining financial assistance from banks and institutions.

"The government is keen to work out a solution to the problem of credit rating of SSIs and is considering setting up a mechanism for enabling these units to get their credit rating done," B S Minhas, secretary to the government of India, ministry of small scale industries and agro & rural industries.

Public sector banks, Minhas pointed out, have been asked to consider the possibility of starting a credit rating agency exclusively for SSIs.

He also indicated that the Centre could even pick up a stake in the credit rating agency.

The SSIs, traditionally, have faced difficulties in obtaining loans on account of their small size/ level of operations, delayed, inadequate and costly credit after offering manifold collateral.

There are around 35 lakh SSIs in India manufacturing over 7500 items. They account for 39 per cent of industrial production, 34 per cent of exports and provide employment to about two crore people.

The rating of SSIs can impact the perception of lending institutions and materially affect the rate of interest at which it can borrow funds.

Minhas said the Administrative Staff College of India, which was entrusted the task of examining the laws, rules and regulations affecting SSIs, had submitted its final draft report to the government on coming out with a single, unified model law for the sector.