Performance and Credit Rating Scheme for Micro & Small Enterprises

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NSIC in consultation with Credit Rating Agencies and Indian Banks’ Association has formulated a Performance and Credit Rating Scheme for Micro & Small Enterprises. The National Small Industries Corporation (NSIC) has been appointed as a nodal agency by the Ministry of Micro, Small & Medium Enterprises to implement the scheme. NSIC empanelled the leading credit rating agencies like CARE, CRISIL, Dun & Bradstreet, FITCH, ICRA, ONICRA and SME Rating Agency of India Ltd (SMERA) to conduct the rating of interested Micro & Small Enterprises under the scheme. While the criteria of finalization is left up to the individual rating agencies, the symbols and the definitions for indicating the risk score has been evolved on uniform basis for implementation by all rating agencies. The scheme was launched on April 7, 2005 by the Finance Minister and Minister of MSME .

Selection of the Rating Agency 

In the Scheme the micro & small enterprises are at liberty to select any of the rating agencies empanelled with NSIC. These enterprises are required to mention the name of the rating agency selected by them in their request for obtaining the rating.

Rating Fee

The Rating Agencies have different fee structure for the rating services provided to various clients including Micro & Small Enterprises. The fee structure for Micro & Small Enterprises has been devised separately under this Scheme.

The Rating Fee to be charged will vary in accordance with the evaluation criteria adopted by various Rating Agencies and their acceptability also varies with the users.

These Agencies are required to intimate their rating fee to NSIC at the time of empanelment, making it known to both the parties. The fees may, however, be reviewed by Rating Agencies from time to time keeping in mind the competition and the number/size of clientele. A ceiling has been prescribed by the Government to subsidize the fee.

The MSEs pay rating fee along with their respective applications. The payment can be made by pay order/demand draft drawn in favor of the Rating Agency selected by the Micro & Small Enterprises.

In the case of a request for rating being treated as closed by the Rating Agency due to non-receipt of the complete information, fifty per cent of the fees received from the Enterprise is refundable. However, if the MSE backs out from the rating process after the Rating Agency has carried out its inspection, no amount is refundable.

Sharing Of Fees

The Rating fee to be paid is based on the turnover of the Micro & Small Enterprise, which has been categorized into three slabs. The slabs of the turnover and the share of the Ministry in the fee charged by the Rating Agency is:-

Turnover

Fee to be reimbursed by Ministry of MSME

Up to Rs.50 lacs

75% of the fee charged by the rating agency subject to a ceiling of Rs.25, 000/-

Above Rs.50 lacs to

Rs. 200 lacs

75% of the fee charged by the rating agency subject to a ceiling of Rs.30, 000/-

Above Rs.200 lacs

75% of the fee charged by the rating agency subject to a ceiling of Rs.40, 000/-

The balance amount towards the fee is borne by the Micro & Small Enterprises.

The portion of the fee to be subsidized by the Ministry is released through NSIC after submission of the Rating Report to NSIC by the Rating Agency.

Rating Scales

While the criteria for evaluation is set by the Rating Agency, the symbols and their definition for indicating the risk score in the rating awarded has been evolved for uniform implementation by all the Rating Agencies. These symbols depict both the performance evaluation as well as the credit worthiness of the unit.

The Rating is to be prefixed by the word NSIC and its valid for a year from the date of issue of the rating report.

Sharing of Rating of Small Enterprises

The Rating Agencies share the Rating awarded to Small Enterprises with NSIC.

Process of Application

The Small Enterprises are required to submit their applications for rating in duplicate and they can be submitted to any of the offices/branches of NSIC or directly to the Rating Agency selected by the Small Enterprise. 

On receipt of application, NSIC forwards the second copy of the request along with the information and documents to the Rating Agency along with their comments, if any. Alternatively, if the application is submitted to the Rating Agency, one copy of the application is sent to NSIC for their reference and comments. 

Promotion Of The Scheme

NSIC is creating awareness about the Scheme, among the Small Enterprises by conducting various open house/exclusive sessions. Various Industry Associations and Rating Agencies are also being involved in these programs. The Scheme is also being propagated through seminars and campaigns conducted by NSIC. Efforts are being made to popularize the Scheme, so that maximum number of units can avail its benefits.

NSIC has tied up with banks such as Oriental Bank of Commerce, UCO Bank, United Bank of India, Central Bank of India, Bank of Maharashtra, YES Bank, UTI Bank, Karur Vysya, Union Bank of India and HSBC Ltd. and others. It has been agreed upon by the banks that the bank will promote the units applying for credit support under this arrangement and it will also re-calibrate the interest rates and security norms while considering the sanction of their proposals.

Performance

The Scheme is getting good response from the Micro & Small Enterprises. Till September 30, 2009, a total of 16,000 units have applied for the rating and various rating agencies have already awarded the rating to 15,000 units.  

Rating Agency

2005-06

2006-07

2007-08

2008-09

2009-10

D&B

466

1356

1800

685

0

CRISIL

149

379

775

2021

1824

SMERA

1

318

715

1333

1060

ONICRA

48

99

547

971

603

FITCH

0

17

13

1

0

ICRA

7

1

0

0

0

CARE

0

0

0

0

0

Total

671

2170

3850

5011

3487

Contact

The Application form for obtaining Rating can be downloaded from the website http://www.nsic.co.in or the interested units can directly approach the nearest NSIC Branch in their city or request at MSME Info-Call Centre, National Small Industries Corporation, NSIC Bhawan, Okhla Industrial Estate, New Delhi -110020 Toll free: 1800-11-1955.