FE exclusive: SIDBI will launch a CIBIL-type score for MSMEs

Credit and financing for MSMEs: The Small Industries Development Bank of India (SIDBI), the leading financial institution for the MSME sector, will launch a new credit risk ranking for MSMEs to enable banks to make lending decisions to small businesses faster.

The new product, developed with credit information company TransUnion CIBIL and digital MSME lending platform Online PSB Loans (OPL), will give a fit score based on the credit risk associated with MSMEs.

Unlike existing MSME rankings, a SIDBI official who spoke on condition of anonymity confirmed that the new rating is being developed based on GST data, ITR feedback (which is a approximation of balance sheet and P&L) and current results. bank account details.

“These details will be compared to company reimbursement data to develop correlations and create different buckets of the Fit Score. For example, companies with unstable GST records or unstable revenue streams are more likely to make default on their loans and will have a bad adjustment score,” he said.

“The MSME Fit Score will be of greater interest as it will be a standard ranking for MSMEs which can be integrated into various platforms like the GST Sahay bill finance app to enable lenders to make decisions faster loans,” he added.

Currently the product is being tested with 400 SIDBI customers and the plan is to reach 600 more. “I would like the Fit Score to be thoroughly tested so that there is a strong correlation between the Fit Score results and the client’s account trajectory.”

Read also : SIDBI launches GST Sahay invoice finance app for MSMEs, opens it to banks and NBFCs

Mukesh Mohan Gupta, chairman of MSME association Chamber of Indian Micro, Small and Medium Enterprises (CIMSME) said the success of the new ranking will depend on its adoption by banks. “There are also MSME ratings, but they have not taken off because banks continue to depend on their own internal rating methodology to make lending decisions or bank loan ratings (BASEL),” he said. -he declares.

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CIBIL also has its credit score for MSMEs called CIBIL MSME Rank (CMR) with values ​​ranging from 1 to 10 where companies rated CMR-1 to CMR-3 are considered the least risky borrowers and CMR-7 to CMR -10 are those with the highest risk.

Former Minister of MSMEs, Nitin Gadkari, previously announced his intention to create a rating system for MSMEs. However, last year, in July, the current Minister for MSMEs, Narayan Rane, informed parliament that there were “no” government plans to implement a rating system for MSMEs. MSME. Quotes from CIBIL and OPL were expected at the time the story was filed.

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