CHENNAI: The National Small Industries Corporation wants the Reserve Bank of India to direct banks to honour the ratings being assigned to small-scale industrial (SSI) units while disbursing credit.

Launched recently, the performance and credit rating scheme for the SSIs is being implemented with the Corporation as the nodal agency, which had empanelled six reputed rating agencies for the purpose.

The NSIC is providing a front-end subsidy of 75 per cent of the fee charged by the agencies up to a maximum of Rs. 40,000 depending on the turnover of the units.

Though the evaluation is expected to benefit the SSIs in several ways, including in exports and becoming a vendor for large firms, the key advantage is to help them access credit from the banks and financial institutions (FIs).

The ratings will enhance their acceptability with the buyers, FIs and banks, said Madhu Gopalakrishnan, Deputy Manager, NSIC zonal office. It would, however, not make the banks scrap their own credit rating mechanism.

Considering the banks' reluctance in extending credit to the SSIs, the NSIC is keen on the RBI "pressuring the banks to recognise the ratings." Stating this, A. Kamalakannan, senior branch manager of NSIC, said the Corporation wanted the Federation of Associations of Small Industries of India to take up the issue with the RBI. The banks should recognise the ratings and offer concessional rate of interest to the units.

The officials were addressing a meeting organised here on Friday by the Madras Chamber of Commerce and Industry on the new scheme.

A SSI representative at the meeting wondered how the scheme would help change the tide for the units, particularly at a time when even government undertakings were not adhering to orders stipulating that earnest money deposit should not be charged from the units registered with the NSIC.

Some of the navaratna companies were also delaying payments to the SSIs violating orders that prescribe a time limit for doing so.

Financial discipline

Detailing the process, officials of four credit agencies said the ratings might infuse a sense of financial and operational discipline in the SSIs.

The executives of Dun and Bradstreet and CRISIL said the firms would host the rating and other details of the units concerned on their global database accessed by buyers.

Noting that the ratings would serve as an input for the decision-making authority in the banks and the FIs, K. Ravichandran of ICRA said for the SSIs the cost of funds would come down and help them differentiate with the competition.

G. Srinivasan of ONICRA said a lifestyle check of the SSI promoters also formed part of the rating process of the firm.

S. Venkatesan, chairman of the chamber's expert committee on banking and finance, said the credit disbursing agencies would have greater comfort while dealing with SSIs with the ratings.

Chamber secretary R. Subramanian said the ratings should be linked to the prudential norms of the banks.

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