Ratings have enhanced SMEs' access to funds and helped reduce borrowing costs: Crisil

April 19, 2011 CRISIL has said that ratings have enhanced SMEs' access to funds and helped reduce borrowing costs. Credit support to CRISIL-rated SMEs grew by 30 per cent, as against the sector average of 20 per cent during the last 2 years. The analysis also reveals that rated SMEs have saved upwards of Rs 175 crores in interest costs alone, with interest rate reductions ranging between 0.5% to 1.25% annually. More than 40% of the rated enterprises chose to renew their ratings year after year, a testimony to the benefits arising from the rating.

CRISIL has also conducted studies on the rated entities and provided insights into three crucial issues facing the sector, namely rising interest rates, bank finance and delayed payments from large customers.



First, SMEs are indeed vulnerable to high interest rates. A 1 per cent increase in interest rates would lead to a decline of 14 per cent, on average, in the SMEs' profits. Second, while the banks have been lending to the SME sector, there is still scope for additional funding, which could be as large as Rs 500 bn annually. Lastly, SMEs with large corporate customers typically faced a delay of at least 30- 45 days in receiving payments from large customers. SMEs could enhance profitability by over 15% if they received payments from large customers in time.

Besides the benefits arising from competitive funding support from banks, SME ratings are bringing a structural shift in Indian credit markets by exposing SMEs to best practices and standards.

According to NSIC Chairman cum Managing Director, Dr. H.P. Kumar, "The concept of external ratings has helped micro, small and medium enterprises (MSMEs) achieve an independent identity, access funds, attract foreign interest and develop growth strategies. This is a unique scheme devised by NSIC for MSMES in the International Financial Sector."



Read related articles-

Developing micro & small enterprises through Cluster Approach ...Click Here
SMEs Show Buoyancy in the Sector: CII Survey ...Click Here
Bank credit to MSMEs increases by 26% ...Click Here
Guidelines for profitable SME Banking...Click Here
Economic Upturn for MSMEs in India is round the corner ...Click Here
No collateral security for bank loans upto Rs 5 lakh to MSE ...Click Here
2.61 Crore Micro, Small and Medium Enterprises in India ...Click Here

Banknet Group announces launch of initiatives for small and medium enterprises (SMEs)
1. Banknet Conferences to organize exclusive seminar series , which will focus on Emerging Opportunities & Challenges faced by SMEs.
2. Banknet Publications will release collection of papers related to SMEs
3. BanknetIndia.com will launch an exclusive section for SMEs
4. Six Sigma Eventz will provide cost effective event management solutions to SMEs
5. Six Sigma Films will provide one stop assistance for advertising requirements of SMEs
For more information ...Click here

CLICK FOR MORE FEATURES & STORIES


                





 

 

Join Banknet Group Connect with Banknet

Follow Banknet Banknet News Feeds




      Banking | Technology | Finance | Advertise | Terms of use | Disclaimer | Contact us
                         Banknet India | All rights reserved worldwide.