The lack of general awareness among micro, small and medium enterprises (MSMEs) in Uttar Pradesh towards credit rating is impeding their competitiveness and access to cheap credit.
While access to cheaper credit from banks is closed if a unit’s creditworthiness has not been rated, comprehensive evaluation by a designated credit bureau, which could help the unit become more competitive, is missing.
UP is home to an estimated 1.2 million MSMEs, of which about 500,000 are registered. However, less than 10 per cent of registered MSMEs are estimated to have obtained a credit rating from agencies such as ICRA, CRISIL and SME Rating Agency of India Limited (SMERA).
SMERA is the brainchild of the Small Industries Development Bank of India (SIDBI).
Credit rating is a report by a credit bureau based on detailed financial analysis of a unit’s financial history. A unit having a high credit rating gets credit at discounted rates.
“There is general low awareness towards credit rating in North India and UP is no exception. However, we are trying to create awareness in the MSME sector about the benefits of credit rating,” MSME apex chamber Indian Industries Association (IIA) executive director D S Verma told Business Standard.
National Small Industries Corporation (NSIC) provides a 75 per cent subsidy to MSMEs for credit rating, subject to a ceiling of Rs 40,000.
“Since individual banks also perform their own risk analysis before extending credit to a unit, a majority of MSMEs feel the rating does not serve much purpose for them,” he added.
