Financial Daily from THE HINDU group of publications
Thursday, Nov 10, 2005
Financial Daily from THE HINDU group of publications Thursday, Nov 10, 2005 |
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Money & Banking
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Credit Rating Industry & Economy - SSI `SMEs will have to wait to get benefits of ratings' Our Bureau
Mr N. Balasubramanian
Chennai , Nov. 9 THE services of the two-month-old credit rating agency promoted by the Small Industries Development Bank of India (SIDBI) have been used by over a hundred small and medium enterprises, according to Mr N. Balasubramanian, Chairman and Managing Director of SIDBI. At a press conference here today, Mr Balasubramanian termed the number as "very good". (The rating agency, SME Rating Agency of India Ltd (SMERA), is a joint initiative of SIDBI, Dun & Bradstreet, Credit Information Bureau (India) Ltd and several leading banks in the country.) However, SMEs will have to wait a while before their good ratings translate into some tangible benefits, such as a lower interest rate on the loans they take. "It will take some time," Mr Balasubramanian said, but added that SIDBI had planned to lower rates for better-rated SMEs by 25-50 basis points. He agreed when pointed out that the proposed reduction would barely cover the cost of the getting the rating, but said that the rating would enhance the image of the enterprise. Other officials of SIDBI noted that because Dun & Bradstreet was a part of the rating agency, a good rating would also help the SMEs in their export effort. Asked for a comment, Mr D.E. Ramakrishnan, President, Industrial and Financial Reconstruction Association for Small and Tiny Enterprises, a body that represents the SSI sector, said that SMEs were yet to see the benefits of the rating agency. "We were hoping that companies that get a good rating would be able to access funds at least two percentage points lower than the rest. But we do not see that happening," Mr Ramakrishnan told Business Line today. He said that many commercial banks "have categorically told us" that they would not accept SMERA ratings and lend at concessional rates, but would instead continue to rely on their own screening and scoring methods. "We are afraid that SMERA would also fall by the wayside like many other initiatives taken for the SSI sector," Mr Ramakrishnan said. He also said he was sceptical about the number of companies that had gone in for a SMERA rating. "Our information is that only about 10-20 companies had gone in for a rating," Mr Ramakrishnan said. He noted that up to October 31, there was a concessional charge of Rs 7,500 for getting a rating. From the beginning of this month, the charges would be anywhere between Rs 12,500 and Rs 45,000, depending upon the networth of the SME. He said he did not understand why the fees for rating should depend upon the networth of the company.
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