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  • 01-Sep-2022
CIBIL MSME Rank (CMR)  Why MSME needs to verify commercial credit -financeseva

CMR stands for CIBIL MSME rank, it is a tool for the way in the credit risk ranking of micro, small and medium enterprises to make informed lending decisions. It is algorithms based on the credit history data that are used to forecast the chances of an MSME loan going bad in the next 12 months. 


It helps us to understand the credit behavior of MSMEs (Micro, Small, and Medium Enterprises) as well as the probability of default based on rank. It applies to MSMEs with aggregate commercial borrowing between Rs 10 lakhs to Rs 10 Crores. 


The scale of the credit history data is 1 to 10. CMR 1 represents the best rank for the MSMEs and is known to be the least risky. CMR 10 is the riskiest rank for MSMEs. The higher the CMR is responsible, the higher the risk of NPA associated with the MSME.  


CMR uses and categories 

CMR is used to measure credit risk upon such parameters as the liquidity profile of borrowers is assessed by looking at the seasonally adjusted patterns of funds utilization over the past 24-month period and descriptive attributes like the maturity of the entity, ownership type, industry, and location. 


The most important use is the month-on-month analysis of payments made along with the classification of the assets to determine if the borrower has a poor or a good track record. 


CIBIL allocates a rank based on the model it has created for the ranking system. The model classified the entity into three categories: 

  • CMR 1 to 3: This category stands for a good track record or no amount pending.
  • CMR 4 to 7: it refers to failing to perform an obligation, but it will not be considered an NPANPA.
  • CMR 8 to 10: there is a chance that the asset will turn into an NPA for the next 2 years.


CMR table  

Now, we will discuss each CMR ranking point that is assigned to such MSMEs and what they tell lending institutions about borrowing patterns. See the table below: 

CIBIL MSME Rank Consequence 
CMR 1 

The Lowest Possible Default Risk  

Borrowers in this rank are expected to possess the utmost possible likelihood of servicing and fully repaying their credit obligations well timed. 


CMR 2 

A Very Low Risk of Defaulting 

Borrowers in this rank are expected to have a higher probability of repaying their credit obligations on time 


CMR 3 

Somehow Low Default Risk 

Borrowers who are lying in this rank are expected to have a high likelihood and probability of serving their credit obligations on time. 


CMR 4 

Lower than the average risk of defaulting 

Borrowers with this rank are expected to have a much better ability to service credit obligations than the average borrower. Such borrowers carry lower-than-average credit risk. 


CMR 5 

Slightly lower than the average likelihood of defaulting 

 Borrowers with this rank are expected to be better than the person who stands a chance of defaulting  

CMR 6 An average Likelihood of defaulting and the borrower will have an average defaulting risk. 
CMR 7 

A higher-than-average likelihood of defaulting 

Borrowers falling in this rank may have a tougher time servicing their debt obligations than the average borrower. 

CMR 8 

Higher the than the likelihood of default. 

Borrowers who defaulted or have been delinquent in the past, thus come with an extremely high defaulting risk. 


CMR 9 

A high likelihood of default.  

Some financial institutions may also think that a default is probable and if such a borrower defaulted or exhibited delinquent behavior he can default in the future as well. 

CMR 10 

The Highest likelihood of defaulting 

Defaulters of the past or who are already a defaulter have the highest probability of continuing with the in-default status. 


 Also read: What is MSME? Its Definition, Role, and Importance


Parameters to decide the CMR 

The following are instructions on which the CIBIL MSME rank decides. These are a few points you should keep in mind. 

  • Average utilization of revolving trade (Cash Credit/Overdraft) over the last 12 months.
  • Maximum utilization of revolving trades (CC/OD) over last 12 months.
  • Balance buildup behavior for revolving trades (CC/OD). If the value is higher the risk will be greater.
  • Missed payment ratio in the last 12 months for financial trades.
  • Missed payment ratio in the last 12 months for term loan trades.
  • Number of months at least one CC/OD was over- utilized.
  • Number of times when the utilization rate of at least one working capital loan was more than 75%.
  • Months since most recent delinquency (30+ dpd).
  • Months since the oldest trade opened.
  • Number of months in past 12 months, financial trade balance decreased.


Features of CIBIL MSME rank  

  • CIBIL score for individuals, the CIBIL MSME rank is also calculated its unique features make it invaluable for banks and other lending organizations.
  • CMR (CIBIL MSME Rank) can foresee credit risk rating and the possibility of an MSME turning into a non-profitable asset (NPA) within a year.
  • The CIBIL MSME rank supports MSMEs that have overall commercial borrowings with a range of between Rs. 10 Lakhs to Rs. 10 crores.
  • To confirm the algorithm’s accuracy, the CIBIL MSME rank is evaluated with data of over 7 years which includes through-the-cycle (TTC) credit history, using machine learning algorithms.
  • For any particular MSME, its CIBIL MSME rank is calculated based on its credit history for the last 24 months (about 2 years).


Advantages of the CIBIL MSME Rank (CMR) System 

The CMR system helps to the of most formal lending institutions and their lending policies. Through, the ‘Green Channel’ and ‘Straight Through’ processing systems Lending institutions can pre-screen and identify the prospective borrowers with the lowest risk profile and reduce the overall reversion time in terms of credit disbursals. 


The CIBIL MSME Rank allows for a more possible underwriting process by particular lenders with an objective description of a borrower’s risk profile. This system is also used to set business loan interest rates based on the risk profile. MSMEs that rank higher on CMR’s scale are usually granted business loans at lower interest rates. 


The CMR system in addition enables risk-based digital lending. It also helps with the automation of loan renewal or enhancement decisions for lending institutions. 


If any risk profile of the borrowers, the CMR gives early warning signals. This gives indications to the lenders and allows them to have enough time to monitor and review their lending portfolios. 



Q. What is the CIBIL Rank? 
A. The CIBIL Rank is known as CMA (Credit Monitoring Arrangement) and majors on a scale of 1 to 10. It is derived from your Company Credit Report (CCR) which summarizes your CCR in the form of one number. 


Q. How is the CIBIL Rank calculated? 
A. The major parameters that are used to calculate the CIBIL Rank are past re-payment behavior and credit utilization. 


Q. What is a good score in CIBIL? 

A. These MSMEs are ranked from 1 to 10, where the CIBIL MSME Rank 1 represents the maximum creditworthiness and depicts the customer least defaulted on their loan. With such a score lenders can easily give you a loan. 


Q. Who can access CIBIL Rank and CCR? 
A. Banks and Financial Institutions (CIBIL Members) can access information from CIBIL on the principle of reciprocity as only those Members who have provided all their data to CIBIL are permitted to access CIBIL Credit Reports. Members can do the same only to take valid credit decisions. Disclosure to anyone or any entity is prohibited. CIBIL members also can access only the CCR (Company Credit Report). Companies also have an option to request access to their CIBIL Rank and Company Credit Reports directly from CIBIL.  


Also read: How to Improve Your CIBIL Credit Score

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