UP MSMEs warming up to credit rating for growth

Union Budget 2016-17 has hiked support to credit rating scheme by 600% to Rs 200 cr compared with merely Rs 28 cr during 2015-16

The beleaguered Micro, Small and Medium Enterprises (MSME) in Uttar Pradesh are slowly warming up to the idea of getting credit rating for their units.

Credit rating by an accredited institution helps a unit get easier credit terms from banks and financial institutions, while evoking confidence amongst its various stakeholders, including vendors, customers and peers.

The Union Budget 2016-17 has significantly increased support to the Performance & Credit Rating Scheme (PCRS) by over 600 per cent to Rs 200 crore compared with merely Rs 28 crore during 2015-16. This indicates the priority accorded by the Centre to encourage MSMEs get the credit rating umbrella.

PCRS is administered by the National Small Industries Corporation (NSIC) under the aegis of the union MSME ministry.

In this regard, apex MSME body Indian Industries Association (IIA) has signed a Memorandum of Understanding (MoU) with CRISIL facilitate credit rating amongst the MSMEs.

IIA president Manish Goel said access to formal credit and lack of creditability had been the biggest obstacles for the MSMEs.

"One way to overcoming these shortcomings is getting a credit rating. The MoU signed between IIA and CRISIL will facilitate credit rating easily and cost effectively," he added.

Crisil Director Salil Chaturvedi informed the Centre offered subsidy to the MSME units for getting rated under PCRS. The subsidy is 75 percent of the cost of credit rating of the individual MSME unit.

Goel appealed to the MSMEs in UP to get themselves credit rated. "The benefits of this are multifold…you get loans at lower interest rates, gain creditability in business, and ultimately get a chance to scale up. Credit rating is the first step in this direction," he said.

MSME sector is the backbone of the UP industrial base. It is estimated to contributing 60 percent to the state industrial output, employing 40 million and generating economic activity worth Rs 1,20,000 crore annually. It contributes 50 percent to the Gross State Domestic Product (GSDP).

UP is home to almost 4.4 million MSMEs, which includes 4.2 million unregistered units.