Mumbai: Small Industries Development Bank of India (SIDBI), the principal financial institution for promotion, financing and development of the Micro, Small & Medium Enterprise [MSME] sector has executed Memorandum of Understanding (MoU) with ONICRA Credit Rating Agency of India Limited (ONICRA)  to provide ‘Loan Syndication Services’ (LSS) for facilitating flow of timely and adequate crediit to the MSMEs.

The MoU was signed on May 30, 2013 at Mumbai between Shri Varun Mirchandani, Executive Director, ONICRA and Shri Namgial, Country Head, Loan Syndication, SIDBI.  With this, SIDBI has MoU now with all the seven credit rating agencies in the country. On the occasion, S/Shri N.K.Maini and T.R.Bajalia, Deputy Managing Directors, SIDBI were also present.

Under LSS, SIDBI has put in place a suitable ecosystem in partnership with Banks, Rating Agencies and Accredited Consultants. SIDBI has entered into Memorandum of Understanding (MoU) with seven leading public sectors banks (Bank of India, IDBI, Central Bank of India, Indian Overseas bank, State Bank of Bikaner & Jaipur, Dena Bank and United Bank of India) and with six RBI approved credit rating agencies (SMERA, CARE, ICRA, CRISIL, FITCH and BrickWork Ratings).

Onicra Credit Rating Agency of India Ltd. is one of the leading Credit and Performance Rating agencies in India. It provides ratings, risk assessment and analytical solutions to Individuals, MSMEs and Corporates. Third party credit rating and assessment helps to create “trust” between players in financial markets that underpins transactions and trading. ONICRA plays a central and critical role in analyzing, assessing and rating various entities to enable transactions.

In India, more than 90% of the MSMEs are constituted as partnership/ proprietorship concerns, where investment in pure equity form is difficult. Further, SIDBI also understands that most of MSME businesses in India are family owned with value built over generations. Due to these reasons, Indian MSMEs find it difficult to dilute large part of ownership and control in favour of an external entity. Looking to this, SIDBI, based on best global practices, has come out with various innovative financial instruments for MSMEs of different sizes and constitutions which is treated as quasi-equity by SIDBI.

Subordinated capital is a highly popular instrument among MSMEs globally, with minimal equity complexities and simpler documentation and hence quick to deliver and less costly for MSMEs. It is provided on the strength of business, backing of cash flows rather than asset cover and collateral security.

Source : Sachin Murdeshwar