Nitin Gadkari Explained the MSME Credit Rating Scenario in Rajya Sabha

RBI has deregulated the interest rate on advances and these interest rates are determined by banks with the approval of their respective Board of Directors subject to extant guidelines of RBI. Loans to Micro, Small and Medium Enterprises (MSMEs) are provided as per the interest rate structure of the bank. The interest rate is finalized based on various factors which inter-alia include, cost of funds to the institution, the credit rating of the unit, tenure of the loan, the purpose of loan etc.

This information was given by Shri Nitin Gadkari, Union Minister for Micro, Small and Medium Enterprises in a written reply to a question in Lok Sabha.

The rating of MSEs under erstwhile Performance & Credit Rating Scheme of the Ministry of Micro, Small and Medium Enterprises to provide a third party opinion on their capabilities and creditworthiness so as to create awareness amongst them about the strengths and weakness of their existing operations has been discontinued w.e.f  December 2018.

Further, under the Interest Subventions Scheme for Incremental Credit to MSMEs 2018 offers 2% interest subvention on fresh or incremental loans up to Rs.1 crore to MSMEs.