Industry body urges government to create separate ratings for MSMEs
New Delhi, June 3
The engineering exports promotion body, EEPC India, on Wednesday proposed to the government a separate rating system for micro, small and medium enterprises to reflect their size and operational nature.
The separate rating procedure would give due recognition to Indian MSMEs, enable them to access funds at reasonable rates, and improve their competitiveness in the global market.
EEPC India noted that many MSMEs struggle to secure investment‑grade or higher ratings from external rating agencies because they are benchmarked against industry leaders rather than peers.
"As a consequence of having a sub-investment grade rating, MSMEs find it pretty tough to get loans from banks, as they need to pay much higher collateral than those with an investment grade rating," Pankaj Chadha, Chairman, EEPC India, said in a letter to the Ministry of MSME.
The statement cited the example from the steel sector where small MSME units are compared with giants such as JSW or Tata Steel.
"Now, to ensure a fair competition, it is recommended that the RBI should develop a completely separate system for rating MSMEs only, and these MSME units must be benchmarked against their peers who belong to the same bandwidth," Chadha noted.
In this regard, RBI may also need to set separate parameters dedicated to MSME by taking into account their size and the peculiar nature of their operation.
The MSME sector forms the backbone of the Indian economy, contributing nearly one-third of manufacturing output and accounting for about 45 per cent of merchandise exports.
India's micro, small and medium enterprises remained resilient despite global geopolitical uncertainties, and credit exposure rose to about Rs 46 lakh crore in April 2026, a recent report from credit bureau CRIF High Mark said.
MSMEs' resilience is supported by strong domestic demand, policy support, and diversified credit participation.
The overall credit exposure in the sector rose 12.8 per cent year‑on‑year, supported by asset‑quality gains and diversified geographic and sectoral participation.
— IANS
Reader Comments
This is long overdue. My father runs a small engineering unit in Coimbatore, and he had to mortgage his house just to get a ₹10 lakh loan because of poor rating - even though his business has been profitable for 15 years! Separate rating will level the playing field. But I'm a bit sceptical - will banks actually use these new ratings or stick to their old habits?
Good initiative but execution is key. The rating agencies themselves need to understand ground realities of MSMEs - they can't just use the same parameters with lower thresholds. Also, what about compliance costs for small units? Many MSMEs can't afford fancy audit processes. Government should subsidise rating fees for units with turnover below ₹5 crore.
As someone working with MSMEs in Gujarat, I can tell you this - the real issue is not just ratings but also awareness. Many small business owners don't even know what a credit rating is! 🤷♂️ Separate rating system is welcome, but we also need financial literacy programmes in local languages. Also, this should be linked to faster loan approvals, not just better rates.
I appreciate EEPC India raising this, but isn't this just pushing the problem to rating agencies? The real question is: why do banks need external ratings at all for small loans? In my experience, local branch managers know the businesses better than any agency. Instead of complex ratings, why not empower bank branches to assess MSMEs based on their track record and local knowledge?
As a small auto parts manufacturer in Pune, I've faced
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