Cibil launches MSME borrower ranking to deepen credit, avoid sour loans

Cibil intends to deepen credit flow to small businesses and also help lenders avoid loan losses on such bets

With the intent of deepening credit flow to small businesses and also helping lenders avoid loan losses on such bets, credit information company TransUnion Cibil on Tuesday launched a ranking system for MSME borrowers.

The 'FIT Rank' launched by TransUnion Cibil in association with Online PSB Loans, will rate the over 6 crore micro, small and medium enterprises (MSMEs) by drawing inputs from their current accounts, income tax returns and also Goods and Service Tax (GST) returns to arrive at a score between 1-10 to rate a borrower after taking consent to draw the relevant data.

Cibil's managing director and chief executive Rajesh Kumar told reporters that the ranking will give lenders an idea about the capacity of an enterprise to pay, its creditworthiness and also intention to pay from past experience.

Till now, the leading credit information company (CIC) had the Cibil MSME Rank model in the market which was taking inputs from past loans, but new to credit customers were left out.

Sivasubramanian Ramann, the chairman and managing director of the state-run Sidbi, which has mentored the project, said the product will go into the cash flows of an entity while arriving at the rank, and hence broaden the universe of entities who can borrow because at present, banks insist on collaterals.

Ramann said he expects a huge spurt in unsecured business loans with the new offering, while Kumar said Cibil wants to replicate the success on the retail assets front, where the CICs' intervention with rankings and scores led to huge rise in assets.

Kumar said he expects banks to extend loans in a templatised format of up to Rs 1 crore using the newly launched product, which has already been adopted by 40 lenders.

Asked about the advantages of using such a platform for banks, many of whom are already using the same data for credit underwriting, Kumar said the lenders will be able to get the probability of default in a particular case because the engines have sifted through the data of many years while arriving at the rank.

He added that it will also help lenders monitor outstanding credit by timely flagging any aspects of concern.

Ramann said it will also help a MSME to go to the market and ask for the best rates because of the ranking.

Kumar added that a facility to let MSMEs access and monitor their own credit report is also in the works.