Sources said this came after India’s largest public lender State Bank of India (SBI) recently complained that credit rating agencies do not understand the nuances of MSME businesses, which are different from large corporates.
MSME industry associations have been making representations against rating of loans to the sector even since this system was introduced in 2012.
Federation of Indian Micro, Small and Medium Enterprises (FISME) had recently pleaded for Prime Minister’s intervention to direct banks to put in place their own risk assessment models and do away with third-party rating for appraising loans to small enterprises.
But the RBI has been forced to act after SBI raised objections to parameters being used by credit rating agencies for rating of MSME loans.
“Rating model used by credit rating agencies does not take into account the nuances attached to SME business as SMEs are not the same as large or mid corporates. A dialogue is needed with rating agencies to rectify the anomalies in rating parameters being used”, Rajnish Kumar, Managing Director (National Banking Group), SBI, said in a recent meeting of the Standing Advisory Committee on Flow of Institutional Credit to MSME Sector.
Source: Asian Age
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