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Credit rating can help SMEs in more ways than one
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Bikky Khosla | 15 Feb, 2011
While Small and Medium Enterprises (SMEs) are always irked by the fact that banks and financial institutions are not forthcoming in giving loans to them, I feel SMEs too should make some effort so that they are able to get loans easily without sweat. If figures are accurate, I'm told that of more than 14 lakh SMEs operating in the country, only a meager 8.5% of bank loans go to them. The basic reason for this low rate is that most SMEs being from the unorganised sector, their credibility is apparently questionable.
The best way to resolve the issue, I would say, is to get a credit rating. While the government insists that credit rating is not a necessary requirement for any Micro and Small Enterprises (MSEs) to get a loan, rating no doubt serves as a trusted third party opinion on the creditworthiness of SMEs.
The benefits of getting a credit rating are manifold because it makes banks comfortable while dealing with them and thus helps in reducing the interest rates. It is an accepted fact that a good rating helps SMEs in obtaining faster and concessional credit from banks. As such credit rating helps for the capital provisioning requirement for SMEs. So undertaking credit and performance rating from a reputed and accredited independent rating agency, I believe, is energy rightly spent.
Today the rating agencies approved for the purpose are ICRA, Crisil, Care and Fitch. In the first scheme there are four rating agencies that have been empanelled by RBI. Apart from these four, two others are SMERA and ONICRA.
In most cases SMEs shy away from getting themselves rated due to the fear that they may not get a good rating or probably because the financial statements that they have prepared to get rated do not reflect a true and fair picture of their performance. However, credit rating agencies are mainly interested in the qualitative parameters because financial statements in SMEs do not give much idea about their performance. So they mostly look at their management and how sound the promoter is, or how resilient the SME has been.
I think it's time that SMEs look from the point of view of the bank. For banks, lending to a rated SME would reduce their capital charge as against lending to an unrated SME. In addition, banks need to have a benchmark to compare their own credit assessment. So credit rating seems to be the only rational route. Above that, whenever a client sees the credit rating of the company it wants to do business with, it gives him/ her a confidence because of the credibility one earns from getting itself rated. Do we agree on this? We would definitely want to know if any of our readers have ever got their company rated. Did getting a credit rating help you in getting loans easily? For readers who have not got their companies rated, tell us why you went against it.
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Brief on CREDIT RATING
Avijit Verma | Thu Feb 6 16:52:09 2014
Better the Financials(SME),Better the Credit Rating,Better the Interest rates.And to be more precise,Easier the Loan Access with Credit Rating.
Getting Credit Rating
R.Mukherjee | Tue Jul 24 11:56:16 2012
I am the owner of HR Staffing company engaged in pan-India recruitments. Since lot of our clients want background checks to be done on selection of a candidate, I am actually thinking of starting a background verification orgn.
Will a credit rating help and what will be the cost
I WANT LOAN TO START MY FIRM
DIPESH.GUPTA | Wed Nov 30 12:00:01 2011
Hi...I have a nice business idea as well as talent to start & run a firm/industry but the thing is that i don't getting the loan from banks i had asked various banks but i failed to get loans. So, what steps should i take to get a loan to start a manufacturing unit....???
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Re: I WANT LOAN TO START MY FIRM
Manish | Wed May 16 12:42:22 2012
Contact Manish Kumar Gupta
Marketing Associate
Crisil Ratings
097799-06984, 094635-76548
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Credit Rating Agencies fleecing NSIC / DCMSME
Surender | Sat Jun 25 10:32:51 2011
CRISIL like agencies have been successful in encashing subsidy funds of MSME Ministry without ant practical purpose being served for the cause of MSMEs who too inthe run, get fleeced by their contribution to CRISIL etc.
Want to get credit rating
Ms.Shashi Madhok | Thu May 5 06:46:39 2011
though I have tried many times to get loan from Canara Bank with whom am having my current account since 99,they always wouch for the effort I put in as women enterpreneur handling all the the departments alone but when the question of lone comes they need some property to mortagage,I discuss with them that u r watching my growth consistently why cant u give me loan and if I had any property to mortgage why will I ask?Iwill rather tell them to do it now.
if this column is only to get the views then fine otherwise it should fetch me some result then the credit rating agencies should get in touch and try to forward the benfits to the people who are trying very hard to work in these vey competitive & adverse situations.
yes I need help because am putting in my 100% yet unable to reach where I would like to see myself.
thanx
Ms.Shashi Madhok
CREATIVE INDIA
PANIPAT
PROCEDURE TO GET SME RATINGS FOR BUSINESS IN MAHARASHTRA
Umesh Sheth | Tue May 3 11:01:10 2011
Greetings,
I am an Associate working with the biggest credit rating company of India. My experience so far has seen a lot of companies at the Micro and Small level getting rated for a mere reason.. "GROWTH"
Credit ratings in today's competitive world stands most Important as the preferences of the customers are not the price, not the quality, but the Credibility. The prices and the quality are more or less competitive. the only thing that stands your company apart is its credibility, its durability and its performance. this can be evaluated by a Credit rating. At Crisil, we not only consider the financial strength, but also the Performance capabilities of the company which helps the company to evaluate and compare its current standing in the market as compared to the other SMEs. Apart from the privilege of getting rated, the SME are also given a Detailed analysed report that helps them understand their strengths, weaknesses and the Areas of Improvement for their further development. All these backed by the Fees of which 75% is subsidized by the NSIC. Not a bad deal to strike isn't it?
For more Assistances, feel free to contact me.
Regards,
Umesh R. Sheth.
SMEs don't look back, go forward.
Avinash Chandra Jha | Mon Mar 21 11:32:01 2011
Nicely written article, Mr. Khosla.
Just wanted to add few more aspects how a credit rating may help an SME.
To describe "self" has been a stupendous task for many a great. So, to start with, an external rating exercise throws a challenge to an SME to let others know and convince what you are.
Secondly, MIS has been managed very poorly by our SMEs, going through the credit rating forces you to streamline the information about your company in a better coherent way and document it. Now it could be used as a reference check/benchmarking etc. So next time an SME go out to explore a prospective buyer/supplier/associate take it along and share your professional attitude and inclination saving time and energy.
Third, get an opportunity to know more from a competitive point of view. You have every right to sit and agree/disagree with the rating team and ask for the concrete rationale of the rating given to you.
All said and done rating agencies have to come out of the typical mindset and take the SMEs seriously. Their expertise doesn't lie in just analyzing of big bull, but also in convincing SMEs about their methodologies and ways to rate.
Thank you.
Credit rating
Prashank Gupta | Mon Mar 14 19:17:21 2011
Please also throw some light on the cost of getting credit rating done and the time and process it takes.
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Re: Credit rating
Kishore | Thu Mar 24 13:09:50 2011
Cost of getting a credit rating is very minimal. 75 percent of the fees will be bared by NSIC. Your rating fees will come down to 10 to 12 thousand only. It takes nearly around 1 to 1 and half month to get the rating report provided the documents requested by rating agencies are provided in time
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Re: Credit rating
Darshan Salot | Thu Apr 7 09:43:40 2011
Cost will depend on your debt size. and for the matter of time, it takes generally 3 to 4 weeks.
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credit rating
Vikram | Thu Mar 3 12:23:03 2011
This will give both credibilty and status
Credit Rating In Gujarat
Bharat Prajapati | Mon Feb 28 11:20:02 2011
Dear All,
If you wish to rate your company, you can contact me.
Thanks,
M -09825310954.
credit Rating
Shamna | Tue Feb 22 11:11:18 2011
I have done the rating thru onicra , but BOB is not accepted my Rating eventhough i had credit exposure less than 4 crores. No benefit had pass on to me.
Regards
Shamna
SME RATING FOR A MSME UNIT
VIVEK GOEL | Fri Feb 18 13:48:34 2011
CEDIT RATING IS A GOOD THING FOR A UNIT,AND I HOPE IT SHOULD BE MUST FOR ALL FOR GETTING A LOAN .BANK SHOULD TAKE INITIATIVE AND ASSIST TO MSME UNITS FOR THE RAING WORK.A MEETING SHOULD BE ARRANGE BETWEEN THE BANK OFFICIALS AND MSME UNITS TO TAKE MAXIMUM BENEFIT OF THE RATING .ADVERTISEMENTS AND TV CAPTIONS SHOULD ALSO BE WORK IN THIS FIELD.KINDLY SEND US THE CREDIT RATING COMPANY DETAILS SO GO AHEAD.
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Re: SME RATING FOR A MSME UNIT
Deepak Malhotra | Tue Mar 8 10:28:47 2011
Contact details of ICRA for SME ratings: Deepak Malhotra
011-23357940 to 23357950
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Credit rating for SMEs
Sukumar | Fri Feb 18 12:08:11 2011
I am doing offset printing business from TIRUPUR.For my company how to get CREDIT RATING? I expect from you to help us full detail to get credit rating
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Re: Credit rating for SMEs
A.Harikrishnan | Wed Mar 2 07:37:30 2011
Sir, This is Harikrishnan from CRISIL ratings, I am taking care of CRISIL's SME rating initiative in Tirupur. YOu can contact me on my Number : Mob;9894863214
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Under Finance and corruption kils SME's growth
Z. A BHAT | Thu Feb 17 15:23:27 2011
Credit rating may help the bonafide, genuine SME's in getting the finance at lower rates and also help them grow faster.The initiative should be taken by the Govt./RBI to make the banks accountable to renew the all accounts with fresh personal identity, adress proof,PAN and also keep a slab on minor accounts which are being run by guadians. I hope this may help to stop corruption and check the unidentified accounts.
To Get Credit Rating
LEELA MEHAN | Thu Feb 17 06:54:40 2011
Good & Professional approach to get the loan easily from banks, when the company has it's credit rating (practically banks are not supporting any upcoming SME's). We would like to get more information on how to get the credit rating for a SME, this will help more people who doesn't have the awareness about credit rating.
Credit rating of SMEs
Narendra Shinde | Thu Feb 17 04:46:13 2011
Dear Sir;
Thanks for such a wonderful article.
Kindly let us also know how to get credit rating, who will do it & at what cost?
regards;
OD Facility
P.Kannan | Thu Feb 17 03:09:22 2011
Dear Sir,
Iam P.Kannan Prop.of serve Maint Engineers we are a maintenance and manufacturing af industrial machineries and machine parts. we are run the company from last 10 years, we have latof buisness in my hand, but we dont have capital finance support, with out finance support turnover the year 40 lakhs. please any heps to me.
thanking you,
P.Kannan
Serve Maint Engineers
CREDIT RATING
S.N.HEGDE | Wed Feb 16 13:07:38 2011
The article is very interesting. But there is no procedure mentioned to apply for credit rating. Can it be applied online?. What is the minimum turnover required? What is the cost involved in getting credit rating? Whom to approach?. How much time required to get the credit rating done? We are an ISO 9001-2008 certified company having more than 10 years experience in water and waste water treatment business and registered SME. We are looking for bank assistance to meet our working capital demand.
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Re: CREDIT RATING
washfi Haque | Wed May 14 16:21:18 2014
kindly contact SMERA
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Credit Rating
Phanin Kumar | Wed Feb 16 12:12:35 2011
Well, I was not aware about credit rating which can help a SME to get loans from the Bank. I started my company in 2008, and into turnkey projects of pipeline. Who can help me in it. Phanin (Director-Vidisha Fire & Technologies India Pvt. Ltd.)
Need OD LIMIT for my import shipments
Dhruv kohli | Wed Feb 16 09:39:27 2011
i m importing medical items from reputated manufacturers from taiwan, malasiya, spain etc. some time i nead funds for my shipments for short period.i want to know how could i get loan or OVER DRAFT LIMIT to grow my bussiness.
The SMEs
Alberto Degregorio | Wed Feb 16 08:44:45 2011
Finally, I think our neighbour Chile country has resolved much more effectively with SMEs. The presentation of the project is very long but with a very well design of the web sites. It's slow but can make by anyone with a computer and a median average capacity. Finally, they have several options to present their project some state banks and many private financial companies or banks, these last should work on a base, but according to their own economic, financial, etc they have some leeway to grant a loan suitable for SMEs that intended to obtain credit. In this part of the process is a matter of will go through the entity that is doing best offer at that time.
In short, it may seem silly or simplistic but I think the best I found for the benefit of SMEs, is to get GOOD COMPUTER SYSTEMS ANALYSTS, able to stand inside in the shoes of aspiring SMEs obtain credit and develop a consistent system the ability of the same. It looks easy but it isn’t. Chile seems that it got it.
Obviously, all this is smashes if appear the corrupt one that it never lacks.
The SMEs
Alberto Degregorio | Wed Feb 16 08:43:27 2011
I think all over world the problem is the same with SMEs. I am in Argentina and some things are properly solved, such as the inability of SMEs to "present their project properly." SMEs are far from having the ability that usually has a great company, with its professional advisors, to present a project. Nor for completing bureaucratic paperwork to the government bodies that certify them as such. To solve this problem the government now decided to provide an "allowance" of US$ 1,000 only to be used in counselling with consultants "authorized." However, the biggest problem faced by the SMEs is the corruption of municipal officials that it is the entity for where the government central government channelled the major credits. These officials always end up giving loans to relatives, friends or dummy. (continue....)
Credit Rating for SMEs
Ulhas Shah | Wed Feb 16 08:15:33 2011
Dear Sir,
Your article on the above subject is indeed an excellent effort on your part to initialize the ball rolling for a small enterpreuner like me.
After a very bad phase, I am seeing a very bright prospect for my own growth, but have got stuck with need for capital for purchasing new CNC machines. Due to bad performance of past 4 years, even I was not comfortable to approach Banks. I must confess, that I was not even aware that one get credit rating even for small industries. While on the subject, it would be appreciated if you could also inform the approximate range of cost involved for getting the credit rating.
Thanks for your valued guidance.
How to get RATED???
Mayur Chaudhari | Wed Feb 16 08:08:12 2011
The idea is liked by many of the entrepreneurs like us.. We request you to Please give the detailed steps to get CREDIT RATINGS here..
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Re: How to get RATED???
Bharat Prajapati | Fri Sep 28 08:38:13 2012
Sir,
Request to provide your complete detail we can ask our executive to visit your place and give guidance on the same.
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CREDIT RATING
Ravi Varma | Wed Feb 16 07:35:58 2011
this is really a good subject and in india
it is very difficult to get loans for SME s
well populated india can grow up only when the system helps SME s . i appreciate if you can send us complete information regarding credit rating
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Re: CREDIT RATING
Bharat Prajapati | Fri Sep 28 08:39:23 2012
Sir,
You can contact on 9825310954 Bharat Prajapai, we will provide the complete solution regarding rating.
Regards,
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Whether we are an SME???
Ajay Agarwal | Wed Feb 16 06:10:37 2011
We are an exporter of printed & dyed bedsheets from India. We buy the raw/greige fabric as per our order from various suppliers, then we print the fabrics as per our order (on contract/job work) and then we get the bedsheets sown & packed as per our buyers orders (on contract/jobwork). In other words we are NOT exporting goods that pre-produced. We especially get all done & "manufactured" as per our buyers orders. However we dont have any factory of our own. Whether will we be eligible for an SME certification?
If anyone knows the answer please help. Thanks.
Ajay Agarwal/Habitat Linen, Mumbai
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Re: Whether we are an SME???
Bharat Prajapati | Fri Sep 28 08:40:27 2012
Hi,
Its based on the SSI certificate as well as the investment in the Plant and Machinery. We are eager to help you in the same.
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Lapses in credit rating
K Gowda | Wed Feb 16 05:29:08 2011
Banks being customer to the credit rating agency, in most of the time they while rating SME organisations they give biased rating only to satisfy their customer. SMEs need separate measuring scale while credit rating.
Credit Rating
Satyanarayan | Wed Feb 16 05:17:25 2011
It is a good message and information. I agree to your points mentioned, It would be a professional way to approach for finance and not adopt other means to get finance at higher rate which is only a burden on SME.
If you can cover up the points focused in Credit rating will also help SME to prepare for such activity.
Today most of the SMEs are also ISO certified. Credit rating trend will also catch up with some guidance like what you have provided
Credit ratings in our favour
Shweta | Wed Feb 16 05:12:00 2011
It is true that credit ratings help both the parties involved in a loan transaction, so it is our favour only that we get our companies rated. We only need more information on how to go about it and what is the procedure.
Regards
Shweta (Shara Jewelry)
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Re: Credit ratings in our favour
Mansur -CRISIL LTD | Wed Feb 16 08:13:49 2011
For further details, We would be delighted to address your queries and assist you in preparing for the CRISIL rating exercise.
Warm regards,
Mansur Basha
Manager- SME Ratings
CRISIL Limited, A Standard & Poor's Company
3rd Floor,Uma Chambers
Plot No:9 & 10,Nagarjuna Hills
(Near Punjagutta Cross Roads)
Hyderabad - 500 082
Phone No : 91(040)-23358103 /23358105
Mobile No : 91-9052232331, 09346201445
Facsimile : 91-40-2335-7507
www.crisil.com
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Working capital loan from nationalised bank
Sujit Kumar Modi | Wed Feb 16 04:57:35 2011
Thanks about the article but i felt that the nationalised bank are not very interested to give the loans to SMEs as they have a doubt on the credibility of the same. There are different schemes by the central govt by which they can give collateral free loan which they dont give. They want 200% mortagage of their loan. Not only they take fixed assets value of which is manifold of their loan but also want cash security.please advise
msme member
BRIJMOHAN AGARWAL | Wed Feb 16 04:26:57 2011
Mr. PK Sinha, Dy.Dir. (Pol) MSME is requested & brought in his personal knowledge that the policies which are made in the presence of representatives from Ministry of Defence,Railways,P&T,DC handloom, KVIC/Handicraft & DC (MSME) as a member secretary .
Because of the reason that The Defence formations i.e. Engineer In Chief, Army head quarter of Military Engineering Services,BEL, Bangalore (Bharat Electronics Ltd.) are not being willing to follow/unawareness of the policies (facilities) mentioned for the MSME enterprises . Hence brought out in your knowledge for the action deemed fit be taken by informing all unit heads accordingly issue instructions & for information with a copy to us also. Beside above it is requested that a letter of authority may kindly be provided to us for e-tendering & on intimation they may allow us also for e-tendering.
Your most urgent action is requested & shall be highly appreciable.
Thanks.
Brijmohan Agarwal # 0851 2577996
Copy to:-Public Grievances officer,Ministary of defence.
Dear Sir,
The MES & BEL are not following the policies made out (exemption of tender cost,EMD & security deposite) in consultation with Defence Ministary for MSME enterprises,kindly look in to matter seriously & do the needful by issuing instructions to the department mentioned in mail above.
Thanks.
Inanticipation
Brijmohan
Dear Advisor,I have so many time written to the MSME aouthority but they are not responding,pl.guide me for right action.
Thanks.
METHOD OF GETTING CREDIT RATING
E. MURALI | Wed Feb 16 04:00:04 2011
The article is very good. Please let us know the procedures for getting getting credit rating. Is there a minimum turn-over threshold?
E. MURALI
President, LNT Electronics, Hyderabad
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Re: METHOD OF GETTING CREDIT RATING
Vara Prasad G | Wed Feb 16 07:25:00 2011
Dear Mr. Murali, You can contact Mr. Mansur Basha @ 9346201445 for knowing about the rating process. regards
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Re: Re: METHOD OF GETTING CREDIT RATING
Ranjan Raina | Mon Mar 21 11:53:54 2011
Can you please tell me how long the process takes?
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No Loans - No credit rating - More Corrupt - More Success - Higher Rating
FVF | Wed Feb 16 00:51:18 2011
Why must we think within a failed paradigm.
The loans are granted against kickbacks or favors. The whole country is involved.
Qualified persons must run the industry. Not MBAs and IT people and business class who claim to know they understand how this worst system works. This group cannot think thru a situation. Because they have not got thru the grind of true education. Loan giving is like the old cliche - the operation was a success the patient died.
Before an industry starts qualified persons must equity finance by working out the market scope.
What is the use of funding huge projects that are dead end.
Then one must consider why Europe and USA are coming to India. To sell to 1 billion people and become rich. The fight for swaraj was in vain. We lost their good governance and welcome their goods of sodas, sunglasses, hand bags and designer underwear. Loans are of no use if foreign trade sweeps local industry off - because an Indian will buy foreign stuff - its a craze. A rich Indian buys a Mercedes car with pride because he falls for a brand image. In Germany it is a taxi.
Crores of rupees are lost on dead end research because there is no accountability in giving funds to incompetent scientists. I know what I am saying.The quality of our research cant be compared with international journals. And the funding is more.
Bankers and financial institution persons are not qualified to understand the total dynamics of funding. CAs know the mind of the small minded banker.
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Re: No Loans - No credit rating - More Corrupt - More Success - Higher Rating
Sankaran Venugopal | Tue Feb 22 06:36:09 2011
Well said, we are talking when we know were the fault lies. But who will clean the monstrous system. Generally, a committee is appointed comprising of retired senior officials who suggest methods which they were themselves not capable of implementing during their time. By then, the foreign brands will challenge us. The only way forward is to strengthen within, introduce simple but effective systems and methods for financial accounting, production and resources. I have seen from my personal experiences - SMEs which are strong in these fundamentals can consolidate their positions and race ahead. After all, quality will attract quality. Credit rating in whatever form is good.
Do not wait for the system to change, change within and the systems around will change with you....
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Great idea...
Umesh shivaraju | Tue Feb 15 20:58:21 2011
How to start and where to start?
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Re: Great idea...
Bharat Prajapati. | Mon Feb 28 11:29:52 2011
Hi,
SSI certificate is must to get the subsidy from NSIC. First Register your company with DIC and get the certificate.
Regards,
Bharat
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Great idea..
Umesh Shivaraju | Tue Feb 15 20:57:12 2011
Thanks for suggestion. we are a small software company with less than a crore turnover. We would like to have it soon. We aprreciate the idea.. However, pls help me where to start.We are from Bengaluru, karnataka.
SME Rating
Charu | Tue Feb 15 15:21:05 2011
The views are very pertinent and the concept of credit Rating for MSMEs are catching up fast. It is mentioned that only four Credit Rating Agencies are approved by RBI for SME ratings whereas RBI accreditation of CRAs are for the purpose of Capital Adequacy purpose. For SMEs rating NSIC provides 75% subsidy on rating fees and for that purpose SMERA is very well accepted rating agency.
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Re: SME Rating
Rajesh | Wed Feb 16 15:51:06 2011
Damn Correct about SMERA
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