Thaindian News

New Delhi, April 19 (IANS) A good rating enhances access to funds and reduces borrowing costs of small and medium enterprises by upto 1.25 percent, Credit Rating and Information Services of India Ltd (Crisil) officials said Tuesday.

“The fundamental problem of most SMEs is access to capital. Ratings enhances the access to funds and reduces the borrowing costs up to 1.25 percent,” Crisil managing director and chief executive officer Roopa Kudva told reporters here.

Crisil Tuesday announced that it has provided ratings to 20,000th small and medium enterprise (SME).

“There has been a steady growth. In the last one year we added 10,000 firms. Our target is to increase the number to over 2 lakh in medium term,” said Kudva adding that Crisil was providing ratings to SMEs as a not-for-profit venture.

The Indian government-run National Small Industries Corporation bears 75 percent cost of the first year ratings of SMEs.

“Government is encouraging SMEs to get rated because it is good for them as well as the overall economy,” said Ramraj Pai, director at Crisil.

Pai pointed out that SMEs, that account for almost 90 percent of employment in organised sector, have access to only 10 percent of bank funds.

Crisil, the leading SME ratings provider in India, claimed that the credit support to SMEs rated by it grew by 30 percent over the last two years as against the sector average of 20 percent.

Rated SMEs have saved over Rs.175 crore in interest costs, with interest rate reductions ranging between 0.5 to 1.25 percent annually, a Crisil report revealed.

According to a Crisil study, SMEs are vulnerable to high interest rates. A one percent increase in interest rates could lead to decline in on an average 14 percent of SMEs profits.

Mumbai-based Crisil is majority owned by the US-based financial services firm Standard & Poor’s.

“High ratings give companies negotiating power. They manage to get rebates in interest rates and take the credits on better terms,” said Pai.

On cost of ratings, Yogesh Dixit, head of SME Ratings at Crisil, said firms with annual turnover of up to Rs.50 lakh could get Crisil ratings for Rs.8,500.

For companies with turnover of Rs.50 lakh to Rs.2 crore, the rate is Rs.12,000 and for firms with annual turnover of above Rs.2 crore, the cost of ratings is Rs.15,000 for first year.

“Companies pay just one-fourth of the cost. NSIC pays three-fourths of it,” said Dixit.