Abstract
SME rating in India is a very new concept. This rating has introduced because most of the SMEs were finding it difficult to obtain loan from banks as the banking system was very lengthy. The unavailability of loan restricts their funds and times required may hamper the growth and expansion of their business. So, for the purpose of removing such a problem of obtaining loan one initiative has been taken by the Government of India is SME rating. Actually, SME rating means the comparative creditworthiness of the rated entity with respect to other SMEs. This type of rating helps to have a greater transparency and also provide a greater opportunity for lending for banks and financial institutions. This rating helps to provide greater confidence to lenders. Some misconceptions are there about SMES. Someone think that SMEs will always get lower ratings because they are small in size and there may have several questions on information risk. For giving such a rating different parameters are judged as business risk, management risk, financial risk etc. But, the weightage for each parameter is different. There exist different SME rating agencies in India as CRISIL, ICRA, CARE, ONICRA, FITCH, and SMERA. Among all the rating agencies CRISIL is the largest one and SMERA is the rating agency, which has exclusively established for rating of SMEs.
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