In order to support banks and credit institutions to achieve robust credit growth in the Micro, Small and Medium Enterprises (MSME) sector while managing the non-performing assets (NPAs), TransUnion CIBIL launched CIBIL MSME Rank (CMR) – a credit risk rank for MSMEs. CMR uses machine learning algorithms to predict the probability of an MSME becoming NPA in the next 12 months. CMR provides a ranking to the MSME based on its credit history data on a scale of 1 to 10, CMR1 being the least risky MSME and CMR10 being the most risky MSME. The higher the CMR the higher the risk of NPA associated with the MSME.

Driving access to finance for MSMEs while controlling the quality of portfolios is the topmost priority for banks and credit institutions. Speaking at the launch, the Managing Director and CEO of TransUnion CIBIL- Mr. Satish Pillai said, “Financial inclusion and credit penetration are the keystones of propelling India on a sustainable high growth trajectory. Availability of credit to MSMEs is the lifeblood of our economy, but the sector is facing an ongoing challenge of rising NPAs. We believe resolving information asymmetry will be a contributor to making 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
  • TransUnion CIBIL has considered all the requirements of a Basel compliant model while developing CMR
  • 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
  • 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 2.1 million 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

Source: Transunion