What is CIBIL MSME Rank?

Micro, small, and medium-sized enterprises (MSMEs) are essential for growth and employment opportunities. At regular intervals, MSMEs require loans to fulfil various financial requirements such as hiring staff, buying the latest machineries, etc. When applying for an MSME Loan, lenders use the CIBIL MSME Rank to check the creditworthiness of the borrowers.

Read on to learn more about what CIBIL MSME Rank (CMR) is, how it is calculated, its significance, and various ranks within the system.

What is CIBIL MSME Rank?

CIBIL MSME Rank is a credit score designed by TransUnion CIBIL specifically for MSMEs. It assesses their creditworthiness by evaluating multiple factors, including the organisation's credit history, repayment behaviour, and repayment patterns. The rank is calculated using complex algorithms and gives a fairly accurate indication of the MSME's default probability.

How is CIBIL MSME Rank Calculated?

CIBIL MSME Rank is calculated based on various parameters, such as an MSME's credit history, utilisation of credit facilities, promptness in repaying loans or credit lines, and the timeline of credit payments. The rank is updated periodically to reflect the most recent credit behaviour and repayment patterns.

CIBIL assigns a score between 1 to 10 to an MSME to assess their credit risk and creditworthiness. A higher rank indicates a higher default probability, while a lower rank implies lower chances of default. The score predicts the possibility of an NPA (Non-Performing Asset) for the lender over 12 months.

Importance of CIBIL MSME Ranking

The significance of CMR lies in its ability to help lenders make informed decisions about lending to MSMEs. It provides a comprehensive assessment of an MSME's creditworthiness, making it easier for lenders to determine the risk associated with extending credit.

A low rank can positively impact the ease of obtaining loans, better interest rates, and improved credit terms. Conversely, a high rank belongs to the riskiest companies and will lead to difficulties in securing credit and favourable terms. Overall, the CIBIL MSME Rank system has made it possible for lenders to provide cheaper credit options to well-performing small businesses.

Understanding Different CIBIL MSME Ranks (Table from CMR1 to CMR 10)

CIBIL MSME Rank is represented using a scale from CMR1 to CMR10, with CMR1 being the highest rank and CMR10 being the lowest rank. Below are the ranks and their implications:

CIBIL MSME Rank	Risk Probability
CMR 1	MSMEs falling under this rank have the highest creditworthiness and demonstrate excellent repayment behaviour
CMR 2	MSMEs with this rank display consistently good repayment discipline and have a strong credit history
CMR 3	MSMEs in this rank signify satisfactory creditworthiness and exhibit generally positive credit behaviour
CMR 4	MSMEs that fall under CMR4 have acceptable creditworthiness with a reasonably good repayment track record
CMR 5, CMR 6 and CMR 7	These ranks indicate average creditworthiness with varying levels of credit behaviour
CMR 8 and CMR 9	These ranks represent MSMEs with low creditworthiness and higher chances of default
CMR 10	This rank represents the riskiest businesses with the highest chance of becoming an NPA

 

Also Read - What are the Steps To Login On CIBIL Portal?

Features and Benefits of CIBIL MSME Rank

The features and benefits of CIBIL MSME Rank are given below:

1. Improved Loan Approval Chances: A lower CMR increases the chances of loan approvals as it indicates a lower default probability.

2. Better Loan Terms: MSMEs with a rank close to 1 will receive the most favourable loan terms, including the lowest interest rates and longest repayment periods.

3. Increased Trust: Lenders are more likely to trust MSMEs with a lower CIBIL MSME Rank, making it easier to establish partnerships and secure credit facilities.

4. Enhanced Business Opportunities: A good CMR may open doors to collaborations, government tenders, and other business opportunities requiring a strong credit profile.

5. Efficient Credit Decision Making: Lenders can make quick and informed credit decisions based on the CIBIL MSME Rank, streamlining the loan approval process.

Also Read - How CIBIL Score is Calculated | A Step-by-Step Guide

To Conclude

The CIBIL MSME Rank is a powerful tool that aids in assessing the creditworthiness of MSMEs. Providing an in-depth evaluation of an MSME's repayment behaviour and credit history enables lenders to make informed decisions. MSMEs with a lower rank can enjoy benefits such as improved loan terms and easy access to financing. MSMEs must monitor their CMR and work towards improving it to unlock better opportunities.

Frequently Asked Questions

1. What is the significance of CIBIL MSME Rank for lenders?

The CMR helps lenders assess the creditworthiness and default probability of potential borrowers, aiding in the loan approval process.

2. How often is the CIBIL MSME Rank updated?

The CIBIL MSME Rank is updated periodically to reflect the most recent credit behaviour and repayment patterns.

3. Can a low CIBIL MSME Rank be improved over time?

Yes, a low CMR can be improved through consistent and disciplined repayment behaviour, timely payments, and responsible credit utilisation.

4. Are there any fees associated with obtaining the CIBIL MSME Rank?

CIBIL charges a nominal fee for accessing the CMR score. The details and pricing can be obtained from the official CIBIL website.

5. Does the CIBIL MSME Rank consider the size of the MSME?

No, the CIBIL MSME Rank is calculated based on the credit behaviour and repayment patterns of the MSME, irrespective of its size.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
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