Piyush Goyal slams ‘ridiculous’ rating norms that compare MSMEs with billion-dollar firms

Commerce Minister Piyush Goyal

Commerce Minister Piyush Goyal on November 11 termed the existing credit rating framework “ridiculous,” given micro, small and medium enterprises (MSMEs) are assessed on the same parameters as multi-billion-dollar companies.

“…a small engineering firm of Rs 100-200 crores or a company that is processing steel is benchmarked to a JSW steel, which is a 100 billion dollars company. Just because they are both in the steel sector. I think it is quite ridiculous. Whoever has come up with this framework is answerable,” Goyal said while addressing an event organised by CareEdge Global.

The minister urged rating agencies and regulators to develop a more realistic system that recognises strength of MSMEs, noting that the absence of any AAA-rated small firms reflects flaws in the current approach.

“How can an MSME with a turnover of Rs 100–200 crore be benchmarked against a company with a turnover of Rs 50,000 or RS 1,00,000 crore? I don’t know who is responsible for this, but perhaps CareEdge should take it up in its engagements with regulators,” he added.

Goyal added that companies should benchmarked based on their sizes.

“Somebody should create a more accurate framework to give credit to these MSMEs so bankers also recognise that and start giving them the right infrastructure and ratings and investors show interest in investing in them…,” the minister added.

Goyal also pointed out that rating agencies often exaggerate minor disruptions or policy changes, creating unnecessary panic. He added that several strong and fundamentally sound companies end up suffering due to such reactions, which fail to take into account India’s broader economic context.

“The distress signals they give are often disproportionate to the actual situation on the ground,” he said, adding that it is important to distinguish deep distress from minor inconsistencies.

“Ups and downs of life and ups and downs of business will always be there. I think there’s a big difference between a collapse and a slight anomaly, and good, robust agencies can always make a proper assessment,” he said.

At the event, Goyal also highlighted India’s strong economic fundamentals, including fiscal discipline and low inflation.