Examples of SMA and NPA

Examples of SMA and NPA

Examples of Special Mention Account (SMA) and Non-Performing Asset(NPA)

The Reserve Bank of India has recently (November 12,2021) clarified the method of calculation of Special Mention Account (SMA) and Non-Performing Asset(NPA) account, in case of default by any customer.

Few Important Definitions and Concepts: 

Day end Process: At the end of every calendar day, SMEcorner shall run a process to determine whether an account will be treated as overdue or not. If by the time the day-end process is run, the dues from the customer are not received into the designated bank account of SMEcorner, the amount would be considered as not received and therefore will be treated as overdue.

Special Mention Account: RBI guidelines require a lender like SMEcorner to immediately recognize incipient stress in borrower account by classifying them as SMA.

RBI prescribes three levels of SMA recognition, viz., SMA-0, SMA-1 AND SMA-2. For definition of SMA and grading mechanism, you may want to refer RBI circular no: DBR.No.BP BC. 45/21.04.048/2018-19 dated June 7,2019 on “Prudential Framework for Resolution of Stressed Assets”.

For your immediate reference please see the table and illustration given below:

Loans other than revolving facilities
SMA Sub-categories Basis for classification – Principal or interest payment or any other amount wholly or partly overdue
SMA-0 Upto 30 days
SMA-1 More than 30 days and upto 60 days
SMA-2 More than 60 days and upto 90 days

 

Illustration:

 

Assumed due date for an account 4th calendar day of every month (say 4th July ,2021)

  • If the EMI/entire dues of a particular account are not received into the bank account of SMEcorner before the day end process is run on the 4th calendar day i.e the due date , the account shall be treated as overdue after day end process. Accordingly, this account shall be classified as SMA-0
  • If this account remains continuously overdue even after the completion of day end process on 30th day from the initial due date, after its classification as SMA-0, the account shall be classified as SMA-1
  • Similarly, if the account continues to remains overdue for 60 days, it shall get classified as SMA-2 upon running of day end process on the 60th day from the initial due date
  • If the account remains continuously overdue for 90 days, it shall get classified as NPA (Non Performing Asset) upon running of day end process on the 90th day from the initial due date
  • NPA’S may be upgraded as ’standard asset’ only if entire arrears of interest and principal are paid and the customer becomes current.

The above illustration has been further explained in the table below:

Day-end process on: DPD Scenario Classification
04.07.2021 1 If full dues are not received before the day end process SMA-0
03.08.2021 30 If full dues are not received before the day end process SMA-1
02.09.2021 60 If full dues are not received before the day end process SMA-2
02.10.2021 90 If full dues are not received before the day end process NPA