Calcutta, Dec. 2: Rating agency Crisil is looking to evaluate a large number of small and medium enterprises (SMEs) eager to get themselves rated to secure credit in an increasingly challenging macroeconomic environment.
A Crisil rating ensures loans at preferential interest rates from banks and financial institutions for SMEs.
Sachin Nigam, senior director of SME Ratings of Crisil, said the company was looking to rate 1 lakh SMEs by 2015. “We have rated 35,000 SMEs and at the moment we are doing about 1,000 cases per month. By 2015, we would look to rate about 100,000 SMEs in India.”
He said the spurt in the number of SMEs looking to get themselves rated was related to high inflation and interest rates that are squeezing their margins and thereby lowering the working capital.
“High rate of inflation directly affects the input cost of SMEs that constitutes about 70 per cent of their total cost. We have estimated that a 1 per cent rise in inflation could result in a 12.5 per cent increase in expenditure for these firms. A 1 per cent hike in interest rate could lower their profits by about 14 per cent,” Nigam said.
Inflation stood at 7.45 per cent in October, while the RBI’s short-term lending (repo) rate and bank rate stood at 8 per cent and 9 per cent, respectively.
“Since both the rate of inflation and interest are at a high level, SMEs are looking to get themselves evaluated to protect their business by having access to credit in a challenging situation,” he said.
Crisil is looking to engage more banks and financial institutions to give loans at concessional rates to SMEs. “We have working arrangements with 46 financial institutions and banks to provide preferential interest rates to SMEs who get themselves rated by us and we are looking to increase the number in the future,” Nigam said. Interest rate reduction for SMEs rated by Crisil ranges from 0.5 per cent to 1.25 per cent.