When it comes down to running an enterprise, funding is the most crucial aspect. Without adequate funds, a business enterprise can’t survive. The funds that the company would manage to gather will determine how it will run ahead. So at times, it becomes necessary for the owners of such enterprises to seek loans from banks.

MSMEs refer to Micro, Small, and Medium enterprises. These enterprises have a rank they figure in among the list alongside other similar enterprises. This ranking determines their credibility concerning getting loans. This rank is the CIBIL MSME RANK.

It is the role of the TransUnion CIBIL to prepare such a list of rankings. Their work in this arena makes them famous, where they provide a list of such enterprises to the various banks and loan granting authorities. Banks and other loan granting powers make use of this list to determine the credibility of the borrowers. The TransUnion CIBIL company had introduced this list in the year 2018. Besides dealing with individual organizations, it deals with Micro, Small, and Medium enterprises as well.

Falling in High Risk Bucket

Distribution of MSME in India

The CIBIL MSME rank helps the banks, financial institutions, and various other legal loan lenders to judge the borrowers of MSMEs in terms of their economic history and creditworthiness. The higher the rank, the more the chances of getting their loans granted.

The ranking of the MSMEs is from 1 to 10. The MSMEs that have a rank of 1 find it easy to get their loans approved by the financial lending authorities. On the other hand, the MSMEs, which have their name in the 10th rank, finds it extremely difficult to squeeze a loan out of the banks.

There are innumerable examples where bad loans are lent out to various MSMEs. Such MSMEs take loans of a significant amount from the banks or other lending authorities. Later their inability to pay back the loan due to their limited or insufficient financial back up results in a bad loan. So the authorities have to be very speculative about giving out loans.

But with the coming of such a ranking policy, things are on the path of change for good. The CIBIL MSME rank of an MSME makes it easier for the lending authority to figure out whether they should approve the loan or deny it.

Several lending authorities have come up with favorable policies in this scenario. On the one hand, they give out loans to the various MSMEs to help them meet their capital requirements, and on the other hand, they provide them with a reasonable time limit and a favorable returning policy.

It makes it easy for enterprises to repay their loans over time. Flexible repayment options over 12 to 60 months are a huge benefit.

Algorithms help in finding out the ranks. After analyzing the algorithmic data, loans are up for approval.

The CIBIL MSME rank helps the authorities to predict whether the MSME will turn into an NPA (Non-Performing Asset) within a year. It also facilitates commercial borrowings from Rs.10 lakhs to almost Rs.10 crores. The credit history of the borrowing enterprise is also at the forefront.

We hope that you can educate yourself about the CIBIL MSME rank and its working in a simple manner through the above information. Wishing that you also get through this ranking successfully! According to a credit information firm, MSME loans worth Rs 2.32 lakh crore are at a high risk of becoming non-performing assets (NPA) as they are in the highest risk category of 7 to 10 TransUnion Cibil.