Consumer Education Literature

In compliance to the Reserve Bank of India Notifications dated November 12, 2021 and February 15, 2022 related to Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances-Clarifications, the Company has formulated the following Consumer Education Literature explaining with examples the concepts of Date of Overdue, SMA and NPA classification and upgradation with specific reference to day-end process. The Company shall also ensure that their front-line officers/staff members shall educate the Borrowers about all these concepts, with respect to loans being availed by them, at the time of sanction/ disbursal of loans.

  1. Date of Overdue: A Borrower’s account shall be flagged off as overdue by the Company as part of their day-end process for the due date if any amount due to the Company is not received on the due date for repayment of the loan, as specified in the Loan Agreement.
  2. SMA (Special Mention Account) Classification: Immediately on default, a borrower’s account shall be classified as SMA (Special Mention Account) under various sub-categories at continuous intervals. Classification of a borrower’s account as SMA shall be done as part of day-end process for the relevant due date and the basis for classification of SMA categories shall be as follows:
    S.No. SMA Sub-Categories Basis for classification – Principal or interest payment or any other amount wholly or partly overdue
    1. SMA-0 Up to 30 days
    2. SMA-1 More than 30 days and up to 60 days
    3. SMA-2 More than 60 days and up to 90 days
  3. NPA (Non-Performing Asset) Classification: Classification of a borrower’s account as NPA shall be done as part of day-end process for the relevant due date and the basis for classification shall be as follows:
    S.No. Category Basis for classification – Principal or interest payment or any other amount wholly or partly overdue
    1. NPA More than 90 days
    Note: In other words, the date of SMA/NPA shall reflect the asset classification status of a borrower account at the day-end of that calendar date.
  4. Upgradation of Accounts Classified as NPAs: A loan account classified as NPA shall be upgraded as a ‘standard’ asset only if entire arrears of interest and principal are paid by the borrower. In case a borrower has more than one loan account with the Company, loan account(s) shall be upgraded from NPA to standard asset category only upon repayment of entire arrears of interest and principal pertaining to all the loan accounts. This provision shall be implemented from October 01, 2022 onwards.
  5. Example of Classification of a Borrower Account as SMA (Special Mention Account) and NPA (Non-Performing Asset): If due date of a loan account is March 31, 2021, and full dues are not received before the Company runs day-end process for this date, the date of overdue shall be March 31, 2021. If it continues to remain overdue, then this account shall get tagged as SMA-1 upon running day-end process on April 30, 2021 i.e. upon completion of 30 days of being continuously overdue. Accordingly, the date of SMA-1 classification for that account shall be April 30, 2021.

Similarly, if the account continues to remain overdue, it shall be tagged as SMA-2 upon running day-end process on May 30, 2021 and if it continues to remain overdue further, it shall get classified as NPA upon running day-end process on June 29, 2021.