MSME credit rating models need to be revisited: Experts

New Delhi, July 31 (KNN) As the Micro, Small and Medium Enterprises (MSMEs) are currently going through a tough phase due to COVID-19 pandemic, experts believe that the credit rating models for MSME should be revisited.

Speaking at a webinar organised by Indian Chamber of Commerce, TransUnion CIBIL managing director and CEO Rajesh Kumar on Thursday said,'' the MSMEs play an important role in the economy and their rating models should be looked into afresh.''

"All rating models need to be revisited in the present scenario arising out of the COVID-19 pandemic. This is more so because capital erosion of the entities has taken place," Kumar added.

He also called for the availability of data from the GST system and payment history of the MSMEs, which would help the rating firms to estimate the probability of defaults.

According to him, it will be helpful in getting the invoices and understanding the production cycles, supplies, cash flows and bank statements.

"All this information will help estimate the probability of default. Of the 50 million MSMEs in India, only ten million are registered with the GST system,'' he said.

''CIBIL has already come up with MSME rankings,'' Kumar added.

Pallav Mohapatra, Managing Director and CEO of Central Bank of India (CBI) too stated that rating parameters should undergo change due to the coronavirus pandemic.

"When there is no realisation of sales proceeds by the MSMEs, their cash flows get affected. In such a case, the parameters used for ratings during the pre-COVID period and now should not be the same," he said.