Credit rating agency for small scale sector soon
The finance ministry has given its approval for setting up an independent credit rating agency for the small scale sector.
By Radhika Bhalla, TNN |
NEW DELHI: The finance ministry has given its approval for setting up an independent credit rating agency for the small scale sector. The agency will be set up by Small Industries Development Bank of India (Sidbi), Punjab National Bank (PNB), Oriental Bank of Commerce, among others. The agency will be evaluating small and medium enterprise (SME) projects for funding. This comes at a time when the government has announced a ���policy package for stepping up credit to SMEs���.
The proposed rating agency will be engaged in rating loan proposals and credit worthiness of enterprises in the SME sector applying for loans to public sector banks (PSBs) and Sidbi.
���A special credit rating agency will be set up by Sidbi in association with eight public sector banks as well as an existing rating agency. The equity component has not been decided as yet. The agency will provide a conducive environment for PSBs across the board to achieve their targets of credit disposal to the SME sector,��� said an industry official.
The policy package announced by the government recently, envisages the PSBs to fix their own targets for funding SMEs in order to achieve a minimum 20% year-on-year growth in credit to the sector.
In addition, PSBs are required to follow a transparent rating system with cost of credit linked to the credit rating of the enterprise.
Further, the package requires commercial banks to make concerted efforts to provide credit cover on an average to at least five new tiny, small and medium enterprises per year.
The rating agency is intended at facilitating public sector banks to achieve targets for funding SMEs. The concept of a credit rating agency for the SME sector was conceived by Sidbi and Punjab National Bank.
Several steps have been taken in the last couple of years to enhance credit flow to enterprises in the SME sector. An SME fund of Rs 10,000 crore was created in April ���04 to be dispersed over a period of two years.
The proposed rating agency will be engaged in rating loan proposals and credit worthiness of enterprises in the SME sector applying for loans to public sector banks (PSBs) and Sidbi.
���A special credit rating agency will be set up by Sidbi in association with eight public sector banks as well as an existing rating agency. The equity component has not been decided as yet. The agency will provide a conducive environment for PSBs across the board to achieve their targets of credit disposal to the SME sector,��� said an industry official.
The policy package announced by the government recently, envisages the PSBs to fix their own targets for funding SMEs in order to achieve a minimum 20% year-on-year growth in credit to the sector.
In addition, PSBs are required to follow a transparent rating system with cost of credit linked to the credit rating of the enterprise.
Further, the package requires commercial banks to make concerted efforts to provide credit cover on an average to at least five new tiny, small and medium enterprises per year.
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The rating agency is intended at facilitating public sector banks to achieve targets for funding SMEs. The concept of a credit rating agency for the SME sector was conceived by Sidbi and Punjab National Bank.
Several steps have been taken in the last couple of years to enhance credit flow to enterprises in the SME sector. An SME fund of Rs 10,000 crore was created in April ���04 to be dispersed over a period of two years.
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