CIBIL MSME RANK (CMR)

CIBIL MSME Rank (CMR) indicates the creditworthiness of Micro, Small, and Medium Enterprises (MSMEs). This ranking system allows financial institutions to assess the risk associated with offering credit facilities to businesses, particularly in the unorganised MSME sector.

 

With a good rank of 1 or 2, your enterprise can access formal sources of finance quickly and affordably. From financing working capital requirements to leveraging growth opportunities, a strong credit rank helps you secure the funds you need on favourable terms.

CMR in banking is a credit risk assessment tool for MSMEs and business entities. This rating denotes the probability of the enterprise defaulting on a loan over one year. It also has other uses, such as:

• Helps financial institutions assess MSMEs 

• Eases evaluating loan applications, thus supporting quicker decision-making 

• Aids in making decisions about renewing loans or offering higher credit limits

• Helps in portfolio management and monitoring, risk-based loan pricing and rule-based limit setting for quicker digital disbursement 

• Facilitates pre-approving MSMEs for credit solutions

While a personal CIBIL score ranges between 300 and 900, this ranking ranges between CMR 1 and CMR 10. While CMR 1 indicates the lowest risk of default, an MSME with a CMR of 10 is more likely to default on repayments. 

CIBIL MSME rank is assigned to an MSME based on its credit profile, credit behaviour and financial figures. MSMEs with a credit exposure of less than ₹10 Lakhs and up to ₹50 Crores qualify for this rank.

Assigned by TransUnion CIBIL, this rank helps lenders assess a business’s finances and repayment behaviour. The CIBIL MSME Rank ranges from CMR 1 (best) to CMR 10 (highest risk).

• Payment History: Timely repayments improve the rank, while delays or defaults lower it

• Credit Utilisation: Using a lower proportion of available credit generally strengthens the rank

• Outstanding Debts: High levels of unpaid debt indicate financial stress and reduce the rank

• Loan Defaults: Any past loan defaults significantly harm the business’s ranking

• Business Stability: Steady operations and consistent revenue streams enhance financial credibility

• Financial Ratios: Debt-to-equity and current ratios reflect the business’s financial health

• Trade Credit Usage: Efficient management of trade credit and cash flow positively influences the rank

• Industry and Economic Conditions: Broader market trends and industry conditions also affect the assessment

The best way to check the CIBIL MSME rank is on the official CIBIL website. Here is how to get your CMR ranking once you are on the homepage:

1. Check for services related to MSMEs

2. Select the CMR service and enter business details such as PAN, GSTIN, or other required information

3. Complete the nominal fee payment

4. Review and download your CMR report

5. Check for errors or discrepancies and report them to CIBIL directly

The system of CMR ranking in CIBIL categorises businesses based on their credit risk levels. Here are different CMRs and what they entail:

Disclaimer: The risk level and probability of default figures may be updated by the credit information bureau from time to time.

 

The rank of your MSME is one of the major factors that impact the interest rate you can get on your business loan. Here’s how banks and NBFCs decide on the cost of the loan based on rank:

Several factors determine CIBIL MSME Rank for your business, providing a review of your business’s financial health. These include: 

• Repayment History and Delinquency

Timely payments of existing loans translate into higher CMR. On the other hand, defaults and delays negatively impact your enterprise’s CIBIL rank. The total outstanding balance and any delinquency associated with a credit facility in your records also impact the rank. 

• Credit Utilisation Ratio

It refers to the percentage of credit you have used from the total available limit. A high credit utilisation ratio generally lowers CMR as it shows a high dependency on credit. 

• Industry Risk

The overall risk of the industry in which your business operates can also impact the CMR of your business. This rank may be low if it operates in a high-risk industry, such as real estate or energy.

• Financial Stability

Credit bureaus generally assess business revenue, profits, and financial growth over time to determine CMR. If your business has stable revenue and growing financials, it could translate into a better ranking. The overall liquidity of your business also affects the rank. 

• Relationship with Lenders

The duration and history of your association with lenders also play a role in your CMR rank. A long and strong relationship can help your business rank higher.

A good CIBIL MSME Rank ensures you can easily secure funding for your business’s working capital needs, expansion, and more. Check out the other advantages your enterprise will receive: 

• Lower Interest Rates

Lenders generally charge lower interest rates to businesses that have a good ranking. It allows for significant savings during repayment.

• Faster Approval

A high CMR not only makes credit available to your business but also ensures a quicker disbursal. This is because lenders generally prioritise approval for enterprises with a higher rank.

• Enhanced Reputation

A high CMR enhances your business's reputation and trustworthiness. It demonstrates that you are a reliable borrower who fulfils financial obligations. It can help you get investment or private funds. 

• Better Negotiation Power

A good CMR gives you leverage when negotiating with lenders, letting you secure more favourable terms.