19% of MSME’s eligible for Govt Guarantee in High-Risk Category


A study of MSME borrowers by TransUnion Cibil shows that 19% of those eligible under the government’s Emergency Credit Line Guarantee Scheme(ECLGS) fall in the high-risk category. And if we see on the positive scenario, 81% of those that will receive these loans are considered to be structurally strong.

The credit bureau is assigning Cibil SME Rank (CMR) to small businesses according to their credit history data on a level of 1-10. The lower the CMR rank, the lesser the risk of bad loans associated with the MSME. CMR 1 is the best possible rank for the least risky MSME’s and CMR 10 is the riskiest rank for MSMEs.

The study according to the TU Cibil Analysis, 28% of the MSMEs have a CMR between 1-3 which makes them ‘Super prime borrowers’ and the least likely to default. Many of the small businesses fall in the ‘ Prime Category’ with a CMR rank between 4-6. The remaining 19% are the riskiest borrowers with a 7 CMR.

A part of its Atamanirbhar Bharat Relief Package announced by the government as a credit government scheme for MSMEs that would facilitate Rs 3 Lakh crore of credit infusion into the sector. In addition to the 100% credit guarantee, the fact that over 80 % of eligible MSMEs have a ranking of CMR 6 or better makes ECLGS guidelines. However, in the drastically market changing conditions, the dynamics of MSME businesses are evolving every day, and therefore, it’s important to not only rely on the original strength of MSME but also regularly monitor borrower’s behavior, said by TU Cibil MD and CEO Rajesh Kumar.

The percentage of ‘sub-prime borrowers’ is at least 18% in the ‘micro’ loans category while the ‘medium’ category of industries has the highest level of sub-prime borrowers at 38% and the ‘small’ category has 23%.

According to the RBI’s March data, micro and small industries accounted for 4.3% of all bank loans, while the medium-size category had only 1.3% of bank loans. The total amount of loans to the MSME industry stood Rs. 4.87 lakh crore at the end of May.