Ease of doing business for MSMEs: Contrary to former MSME Minister Nitin Gadkari’s call for creating a rating system for MSMEs, the MSME ministry currently doesn’t have any proposal to implement a rating system for monitoring MSMEs. In a written reply to a question on whether the government has any proposal for the MSME rating system, the minister of state in the MSME ministry Bhanu Pratap Singh Verma informed Lok Sabha on Thursday that there is no proposal as such for the same.
Importantly, Gadkari in November 2019 had announced that the government is in the process of launching ‘Digital data-based credit ratings’ for MSMEs to enable them to raise bank credit based on the ratings. For MSMEs with AAA rating, the government proposed to buy 15 per cent of the amount raised by the enterprise from public markets as equity stakes. The idea was to boost MSMEs to explore public markets for capital raising.
Also read: Banks’ GNPAs in MSME loans decline to Rs 1.54 lakh crore: MSME ministry
In May 2020 also, Gadkari had reiterated the need for a credit rating system. The minister had sought ideas for an IT-based analysis system for rating MSMEs to bring transparency and have result-oriented and time-bound processes, FE Aspire had reported.
Nonetheless, Credit bureau TransUnion CIBIL in December 2022 had launched a ranking model for MSMEs FIT Rank in tie-up with digital credit marketplace Online PSB Loans. Leveraging business information such as GST, bank statements, income tax returns, the model applies machine learning to predict the probability of an MSME becoming a non-performing asset (NPA) in the next 12 months. The model ranks the MSME on a scale of 1 to 10 based on the financial, income, and trade data.
Also read: Now banks can check the probability of an MSME turning NPA. Here’s how
As of December 12 in the current fiscal, the gross non-performing asset (GNPA) ratio pertaining to MSMEs in the scheduled commercial banks (SCBs) had dropped to 6.1 per cent, according to the data from the Reserve Bank of India (RBI) shared by the minister of state in the finance ministry Bhagwat Karad in a written reply to a question in the Rajya Sabha. SCBs’ GNPA ratio in MSME loans in FY22 stood at 7.6 per cent, 7.3 per cent in FY21 and 8.9 per cent in FY20.
