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12/04/2019 - Indian Economy

iasparliament
April 12, 2019
4 months
771
1

What are the basic objectives of Performance and Credit Rating Scheme for Micro & Small Enterprises (MSME)? Discuss its potential impacts on MSME sector. (200 Words)

Refer - Financial Express

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IAS Parliament 4 months

KEY POINTS

Objectives

·        The main objective of the scheme is to provide a trusted third party opinion on the capabilities and creditworthiness of the Micro & Small Enterprises (MSEs) so as to create awareness amongst MSEs about the strengths and weakness of their existing operations.

·        Aimed at enabling registered micro and small enterprises to obtain credit ratings. 

·        This is to provide them an opportunity to improve & enhance their organizational strengths and credit worthiness, so that they can access credit at cheaper rates and on easy terms.

·        The scheme is also to facilitate them in increasing their acceptability from the Banks/Financial Institutions, Customers / Buyers and Vendors.

Potential impacts

·        Rating is an independent, trusted third party opinion on capabilities and credit worthiness of MSEs.

·        Rating enables MSE units to ascertain the strengths and weaknesses of their existing operations and take corrective measures to enhance their organizational strength.

·        Good rating enables MSEs to access to funds at cheaper rates and better terms,

·        Rating facilitates prompter credit decisions from Banks on proposals of MSEs.

·        Good rating enhances the acceptability of the MSEs with their customers and buyers.

·        Facilitate buyers in capability & capacity assessment of MSEs before finalizing purchase contracts.

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