MUMBAI:
MSMEs with a good CIBIL MSME Rank (CMR) can now avail a lower rate of interest on loans from Oriental Bank of Commerce.
CMR uses machine learning algorithms to predict the probability of an MSME becoming NPA in the next 12 months. It 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 is the risk of NPA associated with the MSME.
Based on this policy, Oriental Bank of Commerce will offer up to 0.25% concession on interest rates to MSMEs with CMR1 to CMR3 and internal risk rating of OBC1 to OBC3. Speaking on this offering for MSMEs, Mukesh Kumar Jain, Managing Director & Chief Executive Officer, Oriental Bank of Commerce, said, “Oriental Bank of Commerce is committed to driving access to finance for MSMEs while ensuring profitable growth of credit portfolios. By offering lower rate of interest to our MSME customers who have a good credit history and CMR, we are rewarding good borrowers and promoting a disciplined credit culture along with ensuring healthy quality of our MSME portfolio.”
The fourth edition of TU CIBIL MSME Pulse indicates that MSME segment continues to be profitable for the credit industry and promises potential of growth and healthy returns. The net interest margin (NIM) in the MSME segment ranges from 4% to 7% depending on type of loan and risk associated with the borrower. The Return on Asset (ROA) of lending in the segment is estimated at 2% – 5%, which is a healthy rate of return. An analysis from TransUnion CIBIL’s commercial bureau shows that there are more than 11 lakh MSMEs with CMR of 3 or better, which are eligible to benefit from this interest rate policy.
TransUnion CIBIL Data Analysis shows that around 11 lakh MSMEs in India have a CMR ranging between CMR 1 to 3 and therefore are eligible for lower rate of interest from Oriental Bank of Commerce under this policy.
Commending this policy by Oriental Bank of Commerce, the Managing Director and CEO of TransUnion CIBIL, Satish Pillai said, “MSME segment continues to be profitable for lenders and with risk based pricing of MSME loans, lenders can further strengthen the lending process while significantly controlling the quality of portfolios. By offering lower rate of interest based on CMR, Oriental Bank of Commerce will be able to drive access to finance for deserving MSMEs and accelerate profitable growth. We believe that CMR based pricing is the next evolutionary milestone in India’s MSME ecosystem as more and more credit institutions adopt this policy.”
