Death by downgrade: A reckoning for India's MSMEs

Covid-19 killed 35% of India's MSMEs; a 28 September SC hearing could determine whether credit rating agencies like Crisil, CARE, and ICRA kill even more

The moratorium is done. The real pain starts now for MSMEs, for whom loan repayments start but business is still in a slump

In a PIL that the SC is scheduled to hear on Monday, borrowers are fighting to suspend compounding interest on repayments and also to raise the issue of credit rating downgrades

If not suspended, credit rating downgrades could accelerate the downward spiral of MSMEs

Bankers don't want credit ratings, neither do companies. So who really needs it?

Tirupur, in India’s southern state of Tamil Nadu, is an export hub for textiles. Each year, the town’s medium, small, and micro enterprises (MSMEs) export products worth $3.5 billion, servicing international brands such as Zara, Disney, Nike, and Puma. This year is different. Even as factories continue to churn out clothing, the town is waiting anxiously for demand from exporters to return.

Thirty-two-year-old Gomatha International, which employs nearly 400 people, is among the companies watching the clock tick away. The company, which exports baby and kids wear to countries like Australia, Finland, and Sweden, saw business grind to a halt in March, when India went into lockdown to stave off the threat of Covid-19.

AUTHOR

Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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