Acuité Ratings (formerly SMERA)

Acuité Ratings & Research Limited, formerly known as SMERA Ratings, is a recognised credit rating agency in India that focuses primarily on the assessment of credit risk of micro, small, and medium enterprises (MSMEs), banks, non-banking financial companies, and other financial instruments. In the context of banking, finance, and the Indian economy, Acuité Ratings plays an important role in strengthening credit markets, improving transparency, and supporting the flow of institutional finance to underserved sectors.
The organisation was established with the objective of addressing information asymmetry in the MSME segment and has evolved into a full-service credit rating agency regulated by the Securities and Exchange Board of India.

Background and Evolution from SMERA to Acuité

SMERA, or the Small and Medium Enterprises Rating Agency of India, was established in 2005 with the specific mandate of rating MSMEs. It was promoted by leading financial institutions and industry bodies to improve MSME access to credit by providing reliable and standardised credit assessments.
In 2018, SMERA underwent a strategic transformation and was rebranded as Acuité Ratings & Research Limited. The rebranding reflected an expansion in scope beyond MSMEs to include ratings of banks, non-banking financial companies, structured finance instruments, corporate debt, and various capital market instruments. Despite this diversification, MSME ratings remain a core focus area, preserving the original developmental objective of SMERA.

Regulatory Status and Institutional Position

Acuité Ratings is registered with the Securities and Exchange Board of India as a credit rating agency. As a regulated entity, it adheres to prescribed norms relating to rating methodologies, governance standards, disclosure requirements, and conflict-of-interest management.
In the Indian financial system, credit rating agencies such as Acuité serve as intermediaries between borrowers and lenders by providing independent opinions on creditworthiness. These opinions are widely used by banks, financial institutions, investors, and regulators for decision-making and risk assessment.

Core Functions and Rating Activities

The primary function of Acuité Ratings is to evaluate the credit risk associated with various borrowers and financial instruments. Its ratings reflect the relative ability of an entity to meet its financial obligations in a timely manner.
Key rating activities include:

• Credit ratings of MSMEs, covering manufacturing, trading, and service enterprises.
• Ratings of banks and non-banking financial companies, focusing on capital adequacy, asset quality, profitability, and governance.
• Ratings of debt instruments, such as bonds, debentures, and commercial paper.
• Assessment of structured finance products and securitised instruments.

These ratings help standardise risk assessment across the financial system and reduce uncertainty for lenders and investors.

Significance for MSME Financing

Acuité Ratings retains a distinctive position in MSME credit assessment, an area traditionally characterised by limited financial disclosure and high perceived risk. By providing structured and independent ratings, Acuité helps MSMEs establish a credible financial profile.
For banks and financial institutions, MSME ratings serve as an additional input in credit appraisal, enabling more objective risk-based pricing of loans. For MSMEs, a favourable rating can improve access to institutional credit, reduce borrowing costs, and enhance negotiating power with lenders.
In the broader Indian economy, this role supports entrepreneurship, employment generation, and regional economic development.

Role in the Banking and Financial System

In the banking sector, Acuité Ratings contributes to strengthening risk management and credit discipline. Banks use credit ratings as part of their internal risk assessment frameworks, especially for large exposures, refinancing decisions, and portfolio monitoring.
For non-banking financial companies and capital market participants, Acuité’s ratings support investment decisions, regulatory compliance, and market confidence. By offering independent risk opinions, the agency enhances transparency and efficiency in financial markets.

Research and Analytical Support

In addition to ratings, Acuité provides research and analytical insights on macroeconomic trends, sectoral performance, and credit conditions. These analyses help financial institutions, policymakers, and investors understand evolving risks and opportunities within the Indian economy.
Such research is particularly relevant during periods of economic stress, when timely and objective assessment of sectoral vulnerabilities becomes critical for maintaining financial stability.

Contribution to Financial Inclusion and Economic Development

Acuité Ratings plays an indirect but important role in advancing financial inclusion. By improving the availability and quality of credit information, especially for smaller enterprises, it helps integrate informal and semi-formal economic activity into the formal financial system.
This contributes to better allocation of credit, reduced reliance on informal lenders, and stronger linkages between small enterprises and the organised banking sector. Over time, these outcomes support productivity growth and economic resilience.

Challenges and Criticisms

Like other credit rating agencies, Acuité faces challenges related to data quality, especially in the MSME segment where financial records may be limited or inconsistent. Economic volatility, sectoral shocks, and information asymmetry can affect the accuracy of risk assessments.
There are also broader criticisms of the credit rating industry, including concerns about rating timeliness and potential conflicts of interest. Regulatory oversight and transparent methodologies are therefore essential to maintain credibility and public trust.

Relevance in the Contemporary Indian Economy

As India’s economy continues to expand and diversify, the demand for reliable credit assessment is increasing. Growth in MSME lending, infrastructure financing, and capital market activity has heightened the importance of specialised rating agencies.
Acuité Ratings, with its historical focus on MSMEs and expanded coverage of financial institutions and instruments, is well positioned to support this evolving financial landscape.

Overall Importance in Banking, Finance, and the Indian Economy

Acuité Ratings (formerly SMERA) occupies an important place in India’s credit ecosystem. By addressing information gaps, supporting risk-based lending, and enhancing transparency, it contributes to the efficiency and stability of the banking and financial system.