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Performance and Credit Rating Scheme for Micro & Small Enterprises

Performance and Credit Rating Scheme for Micro & Small Enterprises

Performance and Credit Rating Scheme for Micro & Small Enterprises

The Ministry of Micro, Small and Medium Enterprises has launched the Performance & Credit Rating Scheme (PCR) to enable Micro & Small Enterprises to ascertain the strengths and weaknesses of the existing operations and to take corrective measures to enhance the organizational strength. Under this scheme, the rating of MSE is being carried out through empanelled rating agencies. The rating makes credit available at attractive interest rates and will ensure better productivity of the unit. As part of this scheme, based on the turnover of the MSE, the Rating Agency charges will be reimbursed by the Ministry of SSI.

Know more about the Credit Rating Benefits

Objective

The key objective of the Performance and Credit Rating Scheme is to provide a third-party opinion on the creditworthiness and capabilities of the Micro & Small Enterprises (MSE)

  • To create awareness amongst the Micro and small enterprises ((MSE) about the strengths and weaknesses of the unit’s existing operations
  • To provide an opportunity to SSI units to enhance the organizational strengths and creditworthiness
  • The performance rated MSE can access the credit at cheaper rates and on easy terms.
  • To facilitates the SSI units in increasing the acceptability from the Banks, Financial Institutions, Customers, Buyers, and Vendors.

Benefits of the Scheme

The major benefits accruing under the Performance and Credit Rating Scheme to the rated SSI units include the following:

  • As part of this scheme, the rating is independent and the SSI units can get the trusted third party opinion on capabilities and creditworthiness of the units.
  • Rating enables SSI units to ascertain the strengths and weaknesses of the existing process and take corrective measures to enhance organizational strength.
  • The Good rated MSEME can easily access the funds at cheaper rates and better terms,
  • The rating also facilitates prompter credit decisions from Banks on proposals of Micro and small enterprises.
  • A good rating under the Performance and Credit Rating Scheme enhances the acceptability of the MSE unit with the customers and buyers.
  • This scheme also facilitates buyers in capability and capacity assessment of MSE units before finalizing purchase contracts.

Prescribed Authority

The prescribed authority for the implementation of the Performance and Credit Rating Scheme is National Small Industries Corporation. NSIC is the nodal agency for implementing the PCR scheme through its various branches located in the country. This scheme was formulated in consultation with Indian Banks’Association (IBA), Rating Agencies and Industry Associations.

Rating Agencies

The rating of MSE under the PCR Scheme is being carried out through empanelled rating agencies. Micro & Small enterprises have the liberty to select any of the rating agencies. The following are the Ministry approved rating agencies:

  • Investment Information and Credit Rating Agency of India Limited (ICRA)
  • Onida Individual Credit Rating Agency of India (ONICRA)
  • Credit Rating Information Services of India Limited (CRISIL)
  • SME Rating Agency of India (SMERA)
  • Brickwork Rating Agency
  • India Ratings (earlier known as FITCH)
  • Credit Analysis and Research Limited (CARE)

Rating Methodology

The rating methodology under the Performance and Credit Rating Scheme is a combination of credit and performance factors. The rating of the MSE units will be based on the following parameters:

  • Operational
  • Financial
  • Business
  • Management risks

A uniform rating scale is being followed by all empanelled rating agencies

Rating Scales

The symbols along with the definition while assigning a Rating to MSE are enclosed here for reference.

PCRSchemeGuidelines-9-10

These symbols depict both the creditworthiness as well as performance evaluation of the unit.

Time Frame for Completion of Rating

The entire process of rating will be completed by the rating agency in a month from the date of receipt of the application.

Validity of Rating

The validity of a rating under the Performance and Credit Rating Scheme will be for one year from the date of the issue of the rating letter.

Rating Fee Structure

The Rating Agencies will have a different fee structure for the rating the Micro and Small Enterprises. The Rating Agencies have devised the rating fee structure for MSE under the Scheme separately.

The fee to be paid to the rating agencies will be based on the turnover of the MSE unit which has been categorized into three slabs. The slabs of the Turnover and the share of Ministry of MSME towards the fee charged by the Rating Agency is tabulated here:

Sl.NoTurnover of MSME unitThe fee to be reimbursed by Ministry of MSME
1Up to Rs.50 lakhs75% of the rating fee charged by the rating agency subject to a ceiling of Rs.25,000
2Above Rs.50 lakhs to Rs.200 lakhs75% of the rating fee charged by the rating agency subject to a ceiling of Rs.30,000
3Above Rs.200 lakhs75% of the rating fee charged by the rating agency subject to a ceiling of Rs.40,00

The balance amount towards the rating fee will be borne by the Small-Scale Units.

Documents Required

The following documents required to be submitted along with the application form.

  • SSI, EM-I, EM-II, UAN or UAM (Udyog Aadhaar Memorandum) Registration Certificate
  • Partnership Deed, Memorandum and Article of Association
  • Authority letter to sign the application
  • List of all partners, directors with their age, address, Income Tax Return, qualifications and experience
  • Copy of the audited accounts for the last three years (where accounts for the last year has not been audited provisional accounts duly certified by a Chartered Accountant along with two years audited accounts)
  • In the case of a new project or expansion, copy of the project report containing a brief project profile, cost of project, source, means of finance.
  • Document the products manufactured, marketing tie-up, end-users,  and orders in hand
  • Details of subsidy, tax concession available to the applicant
  • Quality certificates, export awards won membership of any associations

Application Procedure for Performance and Credit Rating Scheme

The following procedure is to be followed for obtaining the performance and credit rating under the scheme.

Selection of Rating Agencies

The Micro & Small Enterprise (MSE) need to select any of the rating agencies empanelled under the rating scheme with NSIC. The rating agency chosen by the MSE unit needs to be mentioned in the application for obtaining the rating.

Submission of Request

The request form for the PCR scheme will be available at all the offices of NSIC and with the empanelled Rating Agencies. The application form can be submitted to any of the offices of NSIC or directly to the Rating Agency selected by the MSE Unit.

The format of the request for obtaining performance and credit rating under this scheme is enclosed here for reference:

NSI

Payment of Rating Fee

Micro & Small Enterprises (MSE) has to contribute the rating fee along with the application. The rating fee payment can be made by way of pay order or demand draft drawn in favour of the Rating Agency selected by MSE.

Note: In the event of the request for Rating being treated as closed by the concerned Rating Agency due to non-receipt of the complete information, 50% of the fees received from the unit will be refunded.

Rating Process

On receipt of Application, NSIC will forward the application with the information and documents submitted by the MSE unit to the Rating Agency along with NSCI comments.

The rating agency will conduct an onsite meeting with MSE Management for further processing of rating and analysis of the Information obtained from the unit.

Allocation of Rating

After the detailed analysis, the Rating will be assigned by the rating agency. The rating awarded by each of the Rating Agencies will be prefixed by the word NSIC.

Reimbursement of Rating Fee

The portion of the fee to be subsidized by the Ministry of SSI will be released through NSIC after submission of the Rating Report to NSIC by the concerned Rating Agencies.

Post by Renu Suresh

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