Cibil pegs MSME bad loans at Rs 55,000 crore,launches score for them
MUMBAI: Warning that the banking industry is staring at a potential stress of nearly Rs 55,000 crore in its MSME exposure, Transunion-Cibil today launched a ranking for small businesses to take care of "information asymmetry".
It estimates the gross non-performing assets ratio for MSMEs -- which it defines as those having total exposure between Rs 10 lakh and Rs 10 crore -- to rise to 9.8 per cent by end March from 8.7 per cent a year ago.
"We find that Rs 54,799 crore of exposures to MSME is sitting in what we define as the highest risk category and may slip into MSME," Cibil chief operating officer Harshala Chandorkar said.
The company today launched the Cibil MSME Rank (CMR), which will rate the 2.1 million MSMEs having borrowing histories, on a scale of 1-10 by going through the seven-year repayment history for them.
It is an algorithm which will determine the ranking based on a variety of factors including payment history and defaults if any, she said, adding it is modelled on the credit score for retail borrowers it launched in 2007.
At present, the CMR is accessible only for the member-banks but gradually it may be thrown open to borrowers, just like the way the credit score for retail borrowers has been, she said.
The company is also looking at introducing similar ranking scale for mid-corporates and large corporates as well, Chandorkar said.
"We believe the rank can provide critical insights for managing risk and thereby enable greater credit opportunities for deserving small businesses," Axis Bank's Jairam Sridharan said, adding his bank will start using it over the next few months.
It estimates the gross non-performing assets ratio for MSMEs -- which it defines as those having total exposure between Rs 10 lakh and Rs 10 crore -- to rise to 9.8 per cent by end March from 8.7 per cent a year ago.
"We find that Rs 54,799 crore of exposures to MSME is sitting in what we define as the highest risk category and may slip into MSME," Cibil chief operating officer Harshala Chandorkar said.
The company today launched the Cibil MSME Rank (CMR), which will rate the 2.1 million MSMEs having borrowing histories, on a scale of 1-10 by going through the seven-year repayment history for them.
It is an algorithm which will determine the ranking based on a variety of factors including payment history and defaults if any, she said, adding it is modelled on the credit score for retail borrowers it launched in 2007.
At present, the CMR is accessible only for the member-banks but gradually it may be thrown open to borrowers, just like the way the credit score for retail borrowers has been, she said.
The company is also looking at introducing similar ranking scale for mid-corporates and large corporates as well, Chandorkar said.
"We believe the rank can provide critical insights for managing risk and thereby enable greater credit opportunities for deserving small businesses," Axis Bank's Jairam Sridharan said, adding his bank will start using it over the next few months.
