Punjab MSMEs averse to ratings

Punjab may be considered as one of the major hubs for the Micro, Small and Medium Enterprises (MSMEs), however these MSMEs are shying away from getting themselves rated due to the fear that they may not get a good rating. According to rough estimates, only 15,000 SMEs got themselves rated till date, out of the total 1.60 lakh such units.

The benefits of getting a credit rating are manifold because it makes banks comfortable while dealing with MSMEs and also good rating enables them to avail the loans at lower rate of interest. Industry experts say good rating helps MSMEs in obtaining faster and concessional credit from banks.

Speaking to Business Standard, CRISIL SME ratings, Director, Salil Chaturvedi said, "In Punjab, about 15,000 MSMEs got credit rated by different agency till now. The number is minimal as Punjab has the large concentration of MSMEs in Ludhiana, Jalandhar, Phagwara and other areas. The basic reason is the fact that most MSMEs are in the unorganised sector. Lack of awareness is also among the reasons. In Northern region, especially Punjab-based MSMEs are shying away from getting credit rated. Chandigarh- and Haryana-based MSMEs are more informed and readily coming forward to get themselves rated."

"MSMEs always complain that banks and financial institutions are not forthcoming in giving loans to them. The rating will help in getting loans easily without sweat." he added.

The Minister for Commerce & Industry, Madan Mohan Mittal, said the most common problems faced by MSMEs are non-availability of adequate and timely credit at cost effective rates, non-availability of skilled human resources, infrastructural bottlenecks, high input costs and a host of rules and regulations.

Addressing North India MSME Finance Summit, organised by Federation of Indian Chambers of Commerce and Industry (FICCI), Mittal said financial services are vital in developing a vibrant MSME sector. However, access to financial services to this sector remains severely constrained. Commercial banks are the oldest institutions which have a wide network of branches, commanding utmost public confidence. Often commercial banks consider MSME financing as risky and costly to serve because of insufficient assets, low capitalisation, vulnerability to market and lack of accounting records.