CMR stands for CIBIL MSME Rank and it is the CIBIL score for businesses. This article will talk about the meaning of CMR in CIBIL.
CMR full form in CIBIL is ‘CIBIL MSME Rank’. This is the same CIBIL score calculated by the Credit Information Bureau India Limited, now TransUnion CIBIL, but for MSMEs.
Micro, Small, and Medium Enterprises (MSMEs) are a backbone of India’s economy. CMR is a credit-default protector model that throws light on the credit behavior of the borrower MSME.
This can help one understand if the MSME will be able to return the loan amount responsibly, or has a chance of defaulting in the coming years. MSMEs that have an exposure of less than Rs.10 Lakh to Rs.50 Crore are ranked under the robust CMR model.
The CIBIL MSME Rank rates MSMEs on a scale of 1 to 10. It is based on the MSME’s credit profile and behavior, and in this case, the lower the rate, the better. MSMEs that are rated 1 are considered the least risky while ones that are rated 10 are thought to be the riskiest.
This ranking system depends majorly on three factors -
Liquidity Risk - This looks at the pattern of fund usage by the MSME in the past 2 years
Repayment Track - This refers to the analysis of the monthly payments made by the MSME, along with the classification of assets owned by it.
Firm Related Observations - These are factors such as how old the MSME is, the type of ownership, its location, the industry, etc.
The following table shows what the categories of ranks mean for an MSME -
1 - 3
These have a good track record and have no amount pending in their name
High, very easy to get a loan
4 - 7
They have failed obligations, but they won’t become NPA (Non-performing Asset)
Moderate, might have certain roadblocks while taking credit
8 - 10
There is a high chance that these will become an NPA in the course of the next 2 years
Low, may face major challenges in getting loans
The CMR Ratings help by providing required information to the credit companies which helps them understand the credit risk involved and make informed decisions. This in turn helps the MSMEs access quick loans as per their credit profiles.
These are the following ways in which CMR is useful -
Helps lenders to evaluate credit risk objectively
Reduces the Turn-Around-Time(TAT) of loans by aiding in credit risk evaluation
Acts as an early warning system for companies to monitor their portfolio
Helps give out loans through a risk based pricing system
Helps lenders set a limit as to how much loan can be given to a particular MSME
Helps in pre-screening and making pre-approved loan offers
Acts as a system on which lenders can base their loan renewals
The CIBIL MSME Rank has revolutionized the way organizations and lenders approached the loan process.
Just like an individual can improve their CIBIL score, an MSME can work on improving their CMR. Here are some tips -
Utilize revolving trade options like Cash Credit (CC) and Overdraft (OD) facilities optimally
Try not to miss payments of financial or loan trades. Even if you miss a few payments, keep the ratio of missed payments under check
Maintain optimal financial trade balance
Try not to utilize more than 75% of a working capital loan
Just like the CIBIL score tells about the creditworthiness of an individual, the CIBIL MSME Rank rates MSMEs. This rank helps both lenders and organizations save time, when they apply for a loan.
As you go lower on this rank, you are considered more creditworthy. It helps you get higher funds at lower interest rates. Factors such as the age of your organization, its annual turnover, and the industry, all play an important role in deciding your rank.
CMR stands for CIBIL MSME Rank, which ranks MSMEs based on their creditworthiness.
The CIBIL score depicts the creditworthiness of an individual, and ranges between 300-900. In this case, a higher score is considered better.
The CMR is a rank given to MSMEs by the TransUnion CIBIL, and ranges from 1-10. Here, a lower score is considered better.
CIBIL MSME Rank-3 means that the MSME doesn’t have any amount pending in their name and they have high creditworthiness. They can easily get a loan at low interest rates.
An MSME can improve their CMR by making timely payments, utilizing their funds properly, and maintain optimum financial health in general.
CMR scores range from 1-10 and the closer you are to 1, the better it is for you. Typically a score from 1-3 is the best, and 4-7 is fairly good.
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