MSMEs with a good CIBIL MSME Rank (CMR) can
avail loans at lower rate of interest from Bank of Baroda
21
lac MSMEs having good CIBIL MSME Rank eligible for lower interest rate
In a pioneering move on risk-based pricing of
MSME loans, Bank of Baroda has announced an offering of lower interest rates on
such loans to MSMEs who have a better CIBIL MSME Rank (CMR). The CMR uses
machine learning algorithms to predict the probability of an MSME becoming NPA
in the next 12 months
CMR provides a rank to the MSME based on its credit history data on a
scale of 1 to 10, CMR-1 being the best possible rank for the least risky MSMEs
and CMR-10 being the riskiest rank for MSMEs. The lower the CMR, the lower the
risk of NPA associated with the MSME. By adopting risk-based pricing of MSME
loans based on CMR, Bank of Baroda will now be able to make access to credit
cheaper for well performing MSMEs in the country.
Speaking about this move, Smt. Papia Sengupta, Executive Director, Bank
of Baroda said, “Bank of Baroda is credited with pioneering innovation and
technology to drive business growth and credit penetration. We were amongst the
first banks in India to offer risk-based pricing on home loans based on CIBIL
Score and now we are the pioneers in offering risk-based pricing on MSME loans
based on CIBIL MSME Rank. Based on this policy, MSMEs with lower CMR can expect
loan starting at ROI of 1 year MCLR +0.05% from Bank of Baroda. CMR based
pricing will help us manage risks better and also enable greater credit
opportunities for deserving MSMEs.”
The latest edition of the TransUnion CIBIL- SIDBI MSME Pulse report
shows that that the total on-balance sheet commercial lending exposure in India
stood at ₹ 54.2 lakh crores, as of March 2018 with Micro and SME segment
constituting ₹ 12.6 lakh crores, which contributes to ~23% of commercial credit
outstanding. The MSME segment also experienced strong growth of over 16% Y-o-Y
for the year ended 31st Mar 2018. An analysis from TransUnion CIBIL’s commercial
bureau shows that there are 21 lac MSMEs with CMR of 6 or better, which are
eligible to benefit from this interest rate policy. The Chart 1 below has the
distribution of all the MSMEs in the country distributed across CIBIL MSME
Rank. The 21 lac MSMEs with CMR in the range of 1 to 6 constitute over 80% of
all the MSMEs in the country.
Driving access to finance for MSMEs while
controlling the quality of portfolios is the topmost priority for banks and
credit institutions. Speaking about this move by Bank of Baroda, the Managing
Director and CEO of TransUnion CIBIL- Mr. Satish Pillai said, “Offering risk-based
pricing on MSME loans is a very progressive move by Bank of Baroda and we are
confident that CMR-based pricing will not only help in risk control and better
asset quality, but also drive credit penetration for many more deserving MSMEs
thus fueling business growth. CMR helps resolve information asymmetry and
contributes towards enabling objective credit decisions while ensuring a wider and faster access to
funds for MSMEs”.
CIBIL MSME Rank at a glance
CMR
is a credit risk rank for MSMEs that predicts the probability of an MSME
becoming NPA in the next 12 months
CMR
is applicable to MSMEs with aggregate commercial borrowings between INR 10
Lakhs and INR 10 Crores.
CMR
is trained on over 7 years of through-the-cycle (TTC) credit history data using
machine learning algorithms
CMR
is calculated based on 24 months of the MSME’s credit history on the bureau
CMR range:
CMR1 to CMR10; CMR1 denoting the lowest credit risk and probability of NPA and
CMR10 denoting highest risk and probability of NPA.
Currently
around 27 lacs MSMEs are eligible to be ranked on CMR.Benefits of CMR for banks
and credit institutions:
Objective lending decisions for MSME lending
Faster underwriting process by deciding a
threshold investment rank.
Standardize the risk management process
Build and implement effective business and
risk strategies.
Provide risk-based pricing for MSME loans
About TransUnion CIBIL
TransUnion CIBIL is India’s leading credit information company and
maintains one of the largest repositories of credit information globally. We
have over 3000 members–including all leading banks, financial institutions,
non-banking financial companies and housing finance companies–and maintain more
than 1000 million credit records of individuals and businesses.
Our mission is to create information solutions
that enable businesses to grow and give consumers faster, cheaper access to
credit and other services. We create value for our members by helping them
manage risk and devise appropriate lending strategies to reduce costs and increase
portfolio profitability. With comprehensive, reliable information on consumer
and commercial borrowers, they are able to make sound credit decisions about
individuals and businesses. Through the power of information, TransUnion CIBIL
is working to support our members drive credit penetration and financial inclusion for building a stronger economy.
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