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Union Finance Minister launches SME Rating Agency of India Ltd

Published : Coimbatore, September 5, 2005

SME Rating Agency of India Ltd (SMERA), the dedicated rating agency for SME sector in India
was formally launched at the hands of Union Finance Minister, Shri P. Chidambaram, at a
ceremony at Coimbatore. SMERA has been set up by Small Industries Development Bank of
India (SIDBI) in association with Dun & Bradstreet (D&B), Credit Information Bureau (India)
Limited and leading public and private sector banks.

SMEs are critical to the nation’s economy – they contribute approximately 40% of the country’s
domestic production, almost 50% of India’s total exports and 45% of India’s industrial
employment. Despite their economic significance, SMEs face a number of bottlenecks that
prevent them from achieving their full potential. A major obstacle in SME development is its
inability to access timely and adequate finance. There are several reasons for low SME credit
penetration, key among them being insufficient credit information on SMEs, low market credibility
of SMEs (despite their intrinsic strengths) and constraints in analysis. This leads to sub-optimal
delivery of credit and services to the sector. Rating Agencies can play an important role in
addressing some of these concerns. In this context, SMERA is wholly committed to facilitating the
overall growth and development of Indian SMEs. The agency’s primary objective is to provide
SME ratings that are comprehensive, transparent and reliable. SMERA aims to be the country’s
premier agency that is focussed primarily on providing ratings to SMEs so as to reflect their
intrinsic strength, with a view to facilitate faster and easier access to credit. The SME policy
recently announced by Government of India also lays emphasis on using this as a tool for
increasing credit to the sector.

At the launch of SMERA, the Finance Minister highlighted the three major benefits that would
accrue to the rated SME units, viz., adequate and timely credit, low collaterals and lower rate of
interest. Mr. Chidambaram stated that his confidence in SMERA’s long-term success stemmed
from the fact that major public and private sector banks would be stakeholders in the Rating
Agency. The Finance Minister also delineated a 4-pronged strategy adopted by the Government
of India, to promote the SME sector:

a. Doubling the flow of credit to the SSI and tiny sector in 5 years

b. Enactment of an SME bill. Currently a draft of the bill is under consideration

c. Launch of SMERA, a rating agency dedicated to the SME sector

d. Enhancement of Credit Linked Capital Subsidy (CLCS) limit from Rs.40 lakhs term loan
to Rs.100 lakhs and simultaneously enhancing the percentage of subsidy from 12% to
15%, the notification of which is expected shortly

In his address, Mr. Chidambaram requested the bankers to adopt a more considerate approach
towards SMEs that have experienced difficulties in repayments due to circumstances beyond
their control, and only adopt a strict approach towards wilful defaulters.

SMERA is driven by institutions that are leaders in their respective spheres of activity:
• SIDBI is the principal financial institution for the promotion, financing and development of
industry in the SME sector in the country. Over the last 15 years of its existence, it has
developed a suite of products and services for the SME sector. SMERA will be able to
draw upon SIDBI’s longstanding experience in dealing with Indian SMEs and its strong
relationships with public & private sector banks.

• Dun & Bradstreet (D&B) is the world’s leading provider of business information and Risk
Management Solutions with a database covering over 95 million business entities. Over
the past 164 years, D&B has built up an impressive track record in SME Risk Evaluation
& Rating and has over 70 million SMEs in its global database.

• Credit Information Bureau (India) Ltd [CIBIL] is a composite credit bureau catering to both
the commercial and consumer segments. It therefore serves as a repository of valuable
payment information, which plays a major role in reducing information asymmetries and
credit risk.

• SMERA is also supported by several leading public and private sector banks that are
active in the SME space. The recognition and acceptance of SMERA’s ratings within the
banking sector will help SMEs save time, effort and money while approaching different
banks for credit. It will also simplify and quicken the process of lending to SMEs, while
simultaneously reducing lending costs to the sector as a whole.

What is a SMERA Rating?

• SMERA Rating is an independent third-party comprehensive assessment of the overall

condition of the SME, conducted by SME Rating Agency of India Limited.

• It takes into account the financial condition and several qualitative factors that have
bearing on credit worthiness of the SME.

• SMERA Rating consists of 2 parts, a Composite Appraisal/Condition indicator and a Size


• SMERA Rating categorises SMEs based on size, so as to enable fair evaluation of each
SME amongst its peers.

• An SME unit having a SMERA Rating would be able to enhance its market standing
amongst trading partners and prospective customers.


Small Industries Development Bank of India (SIDBI) is the principal financial institution for the
promotion, financing and development of industry in the SME sector in India. SIDBI is committed
to developing a strong, vibrant and responsive SME sector. Alongside finance, SIDBI provides
appropriate support in the form of promotional and developmental services. SIDBI has been built
up as a financially sound, vibrant, forward looking and technically oriented institution and it
intends to sustain this orientation in future. SIDBI intends to provide quality services to its clients,
devoid of any systemic and procedural difficulties. For more information, please visit

About D&B
D&B (NYSE:DNB), the leading provider of global business information, tools, and insight, has
enabled customers to Decide with Confidence for over 160 years. D&B's proprietary
DUNSRightTM quality process provides customers with quality information whenever and
wherever they need it. This quality information is the foundation of D&B's solutions that customers
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