“The ability and willingness to repay loans is the basic building block for relations between the borrower and creditor,” said Yogesh Dixit, head of SME ratings business, Crisil.

Addressing participants at the SME CEO Knowledge Forum in Pune, he said credit ratings are the stepping stones to ensure a smooth flow of finance for small and medium enterprises, and it can their enhance an organisation’s credit worthiness through risk management.

Capital deployment

Pointing out that creditworthiness is critical to an organisation’s sustainability and brings efficiency in deploying capital, Dixit said ratings evaluate risks on various aspects such as management competence, strength of business model and financial well-being. Explaining how a firm’s creditworthiness was derived, he said, “We have an objective scale to arrive at a rati

ng. Financial strength is rated as one of three notches — high, moderate or low on one axis — while performance capability on five notches — ranging from highest to low — is assessed on the other.

The matrix helps them arrive at whether the loan is likely to be repaid, or whether it might become an NPA.

The ratings are valid for a year. Dixit said his company rates 1,300 SMEs a month across the country, and their survey of 3,250 enterprises they had rated and re-rated over a period of three years revealed that (good) ratings helped them get a 30 per cent increase in bank credits, 18 per cent increase in profits, 27 per cent higher sales, and additional exports of Rs 2 crore/annum.

Providing some insight into ratings for SMEs, he said Crisil does around 15,600 ratings/annum across the country, 3,600 of which are in Maharashtra, including 1,200 in Pune.

Nearly 70 per cent of the companies are located in non-metro areas.

At the national level, an average of 72.5 per cent firms rated were found to be credit worthy. The relevant figure for Maharashtra stood higher at 74.1 per cent, while it was 73.1 per cent in Pune.


A rating can cost approximately Rs 52,000/company. For micro and small enterprises that good get good ratings, the cost of the process is subsidised to the extent of 75-80 per cent by the Government and the enterprise incurs Rs 13,000 as expenses.