CMR Full Form in CIBIL Report

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.

What is 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.

What is the Meaning of CMR Rating in CIBIL?

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 - 

How is CMR Rating in CIBIL Useful?

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. 

Ways to Improve CMR Rating

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.