Q 1 – What does it mean for my account to be classified as a Special Mention Account? How does this impact me?

A – Your account will be classified as a Special Mention Account (“SMA”) if it is showing signs of incipient stress resulting in you defaulting in timely servicing or payment of your debt obligations, even though your account has not yet been classified as NPA as per the RBI guidelines. 

It impacts you in a cautionary manner as an early recognition of such accounts will enable banks to initiate timely remedial actions to prevent your account potentially turning into Non-Performing Asset (“NPA”) (defined and explained below).  

Q.2 – When will my loan account be classified as a Special Mention Account?      

A – There are 3 (three) subcategories for classifying Special Mention Accounts based on for how long the amount had been due to be repaid by you/Borrower: 

  1. SMA- 0, if the amount is overdue for upto 30 days 
  2. SMA-1, if the amount is overdue for more than 30 days and upto 60 days 
  3. SMA-2, if the amount is overdue for more than 60 days and upto 90 days 

Example: If the due date of a loan account is January 05, 2022, and full dues are not received before the lender runs the day-end process for this date, the date of overdue shall be January 05, 2022. If it continues to remain overdue, then this account shall get tagged as SMA-1 upon running the day-end process on February 04, 2022 i.e. upon completion of 30 days of being continuously overdue. Accordingly, the date of SMA-1 classification for that account shall be February 04, 2022.

Similarly, if the account continues to remain overdue, it shall get tagged as SMA-2 upon running day-end process on March 06, 2022 (i.e. 60 days from the due date- January 05, 2022) and if continues to remain overdue further, it shall get classified as NPA upon running day-end process on April 05, 2022 (i.e. 90 days from the due date).

Q.3. – When will the loan account be classified as NPA? 

A – The Loan account shall be classified as Non-Performing Asset (NPA) as per the extant RBI Circulars/Regulations when the payment of instalment (principal and/or interest) remains overdue for more than 90 days, that is, the account will be marked as NPA on the 91st day of continuous default from the original due date. 

For example, if the Due Date for payment of Instalment January 05, 2022, then the account shall be classified as NPA on the 91st day past due, that is, on April 06, 2022 .

Q.4. – What happens when I pay all the overdue amount after my account is classified as SMA or NPA? 

A – If you pay the entire outstanding amount, your account will be upgraded to a standard asset and will no longer continue to be a SMA or NPA. In case you have more than one credit facility from a bank, your loan account will be upgraded from NPA to standard asset category only upon repayment of entire arrears of interest and principal pertaining to all the credit facilities.

Q.5. – How will my account be classified as an SMA or NPA and how will it be upgraded upon repayment if I have two or more credit facilities from two or more different lenders/banks? 

A – (i) Your account will be classified as SMA or NPA by each lender/bank separately on default on the basis of Q.2 above. 

(ii) Your account will be upgraded by each lender/bank when you clear the entire outstanding amount with that lender/bank.