SMERA, a beacon of light

An SME rating assesses the financial viability of MSMEs and their capacity to honour business obligations. Besides providing insights into sales, operational and financial composition from a risk perspective, rating highlights the overall health of a business enterprise, benchmarking its performance within the industry for an effective peer review.

Essentially, the objective of rating is to establish the creditworthiness of an MSME unit. Rating facilitates ease of credit analysis and speeds up lending decisions. Not just that, ratings give MSMEs access to a relatively lower cost of finance compared to conventional borrowing rates. This limits an MSME’s dependency on NBFCs that usually offer high-cost loans.

What is credit due diligence?

Traditional institutes of credit like non-banking firms and banks analyse various aspects of a business entity’s commercial potential before lending. They examine the company’s operations comprehensively, verify the material facts about the proposed transactions, and check the financial viability of its projects by evaluating both costs and benefits.


In general, ratings are an indicator of an MSME’s performance and financial strength. Apart from being a potent self-improvement tool, a good rating provides comfort to lenders, bankers, financial institutions, NBFCs, customers, suppliers, foreign partners and collaborators. A detailed analytical report on the strengths and weaknesses of MSMEs helps an MSME by implementing the gaps detailed in the report leading to strengthening their operations, facilitates national and international trade, besides building confidence among potential trading partners.

It’s against this backdrop that SMERA was born. To encourage credit flow to the MSME sector, a need was felt for an independent third-party rating. In 2005, the government of India, acknowledging the necessity of injecting credit into the MSME sector, announced a policy package.

As a sequel to the policy package, Small Industries Development Bank of India in association with Dun & Bradstreet India and public and private sector banks set up a rating agency named SME Rating Agency of India Ltd, fondly called SMERA.

What is SMERA?

SMERA’s aim is to fill the information gap for MSMEs through ratings and other information to help them get quality credit on better terms.

It’s in the interests of MSMEs to receive honest feedback on the long-term sustainability of their business models based on product quality, competence, soundness of governance structures, risk-attitude, and resourcefulness of the management. SMERA provides these businesses with a dispassionate analysis of industry risks, management risks, business risks, project risks, and financial risks to not only win the confidence of lenders but also to cope with unforeseen scenarios.

Also, lenders primarily look into the financials, collaterals and the security margin in case of credit proposals. Credit decisions are made without adequate consideration of cash flows and strengths and weaknesses of MSMEs.

Moreover, the units in MSMEs are heterogeneous, ranging from small enterprises to high-end technology focused manufacturing units. As a result, their evaluation and assessment become complex. This affects credit delivery in terms of timeliness and adequacy. It’s here that an independent customised and SME focused rating agency like SMERA becomes a boon.

What is SMERA Credit rating?

SMERA has delivered over 50,000+ ratings of MSMEs, spread across 20 major sectors and 75 sub-sectors of the Indian economy. Over the years, SMERA has been the catalyst for change in India’s MSME landscape. How has SMERA gained wide recognition and acceptance in this sector?

With each bank having separate rating processes and disclosure requirements to disburse loans, MSMEs would invest a considerable amount of time, effort, and money for loan clearances. SMERA Ratings reduce the turnaround time in processing credit applications, providing the MSMEs access to timely and adequate credit.

A favourable rating from SMERA leads to lower collateral requirements and comparatively lower interest rates.

Furthermore, SMERA Ratings categorises MSMEs based on size, so that each entity is evaluated amongst its peers. This enables rational comparison of companies of the same size, ensuring that the smaller enterprises are not at a disadvantage while applying for credit. SMERA eliminates information asymmetry.

SMERA Ratings also consider industry dynamics by factoring in a system through which an SME could compare its strengths and weaknesses with those of other companies in the same line of business. This is done through statistically derived industry benchmarks for various ratios.

What are SMERA's standout features?

SMERA is credited with some significant initiatives. 

QR code-enabled rating reports 

All rating reports from SMERA are released with QR codes that are proof of their authenticity. This facility allows bankers to scan the QR code and establish the latest rating of an entity from SMERA’s website.

 SMERA Terminal 

It’s a unique product to aid bankers in expanding their credit portfolio and facilitating easy and cheaper credit to MSMEs. Over 45,000 SME units have already been listed on the SMERA Terminal

Independent third-party opinion

Provides an unbiased rating to SMEs and enhances their credibility. It motivates MSMEs to adopt good governance practices for long-term benefits. An independent third-party opinion also serves as a tool for self-evaluation and improvement.


SMERA has signed MoUs with nationalized, co-operative and private sector banks, with several of them extending concessional interest rates to well-rated MSMEs.

Five-star rating system

In 2021, SMERA launched the sustainability assessment for SMEs with a 5-star rating system. With this development, SMERA became India’s first rating company to introduce sustainability assessment for SMEs which includes multiple services such as sustainability rating, peer analysis, gap analysis and training.

What is in it for SME owners and how can SMERA Rating help them?

SMERA Rating opens the doors for MSMEs to deal with large businesses, especially those that have contracts with reputed vendors.

  • It builds trust in international trade partners and becomes the first point of interest to potential trading partners.
  • It acts as a self-correction and self-assessment tool.
  • Enhances brand image. 

SMERA’s six-step execution process ensures that each aspect of the enterprise is taken into account, evaluated and measured appropriately.

  1. Submission of information & documents
  2. Site inspection and management discussion
  3. Detailed analysis by rating analyst
  4. Assignment of rating by a rating committee
  5. Communication of rating to the rated entity
  6. Dissemination of rating

What is SMERA terminal?

SMERA Terminal, a Fintech platform, connects bankers and MSMEs. It’s a dynamic and interactive platform that has information on MSMEs and helps in facilitating funding and decision making for these business entities.

What is in it for bankers?

Banks diversify their non-interest income sources by enlarging their activities like investment banking and underwriting and trading securities. Interest-based lending to any enterprise, MSMEs or otherwise, remains the fulcrum of bank revenue. Banks charge interest on loans at pre-defined rates for a specific period.

Although the borrower is the winner when it secures the loan, banks too gain from greater exposure to MSMEs during the lending process. 

Consequently, many banks have access to several borrowers’ profiles and their credit history, leading to better loan disbursal that benefits the MSME ecosystem at large.

India’s MSME sector contribute nearly 29% towards the GDP through national and international trade. They need a strong methodology that highlights vulnerable areas in the management and evaluates the viability of their operations by factoring in sales trends, cost trends of raw materials and impact on profitability. Like a beacon of light, SMERA lets them know whether they’re on the right track.

Services for SMEs

SME Credit Rating

An independent & unbiased opinion of an entity’s creditworthiness.
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Credit Due Diligence

A thorough fact check to validate an entity’s parameters.
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SMERA Terminal

A fintech platform connecting bankers & SMEs to facilitate loans.
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More about SMERA

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