Dues: mean, the principal /interest/any charges levied on the loan account which are payable within the period stipulated as per the terms of section of the credit facility.
Overdue: mean, the principal / Interest / any charges levied on the loan account which are payable, but have not been paid within the period stipulated as per the terms of the credit facility. In other words, any amount due to the bank under any credit facility is ‘overdue’ if it is not paid on the due date fixed by the bank.
Appropriation Principle: The Principle of FIFO i.e., ‘First in First Out’ accounting method is relevant to arrive at the No. of days of overdue for determining the SMA /NPA status. The FIFO principle assumes that, the oldest outstanding dues in the loan Account needs to be cleared first. The FIFO method thus requires that what is due first must be paid by the borrower first.
For example: if in any loan account as on 01.02.2021, there are no overdues and an amount of Rs.500 (X) is due for payment towards principal instalment/ interest/ charges, any payment being credited on or after 01.02.2021 in the loan account will be used to pay-off the dues outstanding on 01.02.2021.
Assuming that nothing is paid and/or there is partial payment (Rs.200 (Y)) of dues during the month of February, the overdue as on 01.03.2021 will be Rs. X-Y / Rs. 500 – 200 = Rs.300.
Additionally, an amount of Rs. 100 (Z) becomes due as on 01.03.2021, now any payment / partial payment into the account on or after 01.03.2021 will be first utilized to pay-off the partial due of (Rs X - Rs.Y+ Rs Z) / (Rs.500-200+100=400).
Age of oldest Dues (or Days-Past-Due - DPD): The age of oldest dues is reckoned in days from the date on which the oldest payment is due and continues to remain unpaid. In the aforesaid illustration, if the dues relating to 1st February 2021 remain unpaid till 01.03.2021, the age of the oldest dues is reckoned as 29 days on 02.03.2021.
What is SMA? A Special Mention Account (SMA) is a loan account, showing the symptoms of stress as evidenced by a default in payment of the dues, and/or, in which principal or interest or both are overdue but for a period of less than 90 days.
SMA account categorization is a precautionary measure to recognize the financial stress early and therefore to take corrective action to contain that stress and prevent the loan account from turning into NPA.
Classification as Special Mention Account (SMA) and Non-Performing Asset
Lending institutions will recognize the incipient stress in loan accounts, immediately on default by classifying them as Special Mention Accounts (SMA) The boss of classification of SMA/NPA category shall be as follows:
Loans in the nature of Term Loans
Loans in the nature of cash credit/overdraft
SMA Sub-categories
Basis for classification - Principal or interest payment or any other amount wholly or partly overdue
SMA
Sub-categories
Basis for classification - Outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for a period of:
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
Non-performing Asset:
Non-Performing Asset (NA) is a loan or an advance where:
‘Out of Order’ Status:
An account shall be treated as out of order if:
Illustrative movement of an account to SMA category to NPA category based on non-payment of dues at day-end process:
If due date of a loan account is March 31, 2021, and full dues are not received before the day-end process for this date, the date of overdue shall be March 31, 2021.
Due date of payment
Payment covers
Age of oldest dues in days (DPD)
SMA / NPA Categorization
SMA since Date /SMA class date
NPA Categorization
NPA Date
31.03.2021
Entire dues paid upto 31.03.2021
0
NIL
NA
Dues of 31.03.2021 not fully paid at EOD 31.03.2021
1
Dues of 31.03.2021 not fully paid at EOD 29.04.2021
30
31.03.2021 30.04.2021
Dues of 31.03.2021 and 30.04.2021 not fully paid at EOD 30.04.2021
31
SMA since 31.03.2021/
SMA-1 since 30.04.2021
Dues of 31.03.2021 and 30.04.2021 not fully paid at EOD 29.05.2021
60
Dues of 31.03.2021 and 30.04.2021 not fully paid at EOD 30.05.2021
61
SMA-1 since 30.05.2021
31.03.2021 30.04.2021 31.05.2021
Dues of 31.03.2021, 30.4.2021 and 31.05.2021 not fully paid at EOD 28.06.2021
90
Dues of 31.03.2021, 30.04.2021 and 31.05.2021 not fully paid at EOD 29.06.2021
91
NPA
29.06.2021
It is advised to maintain sufficient funds a day in advance in your bank account through which the loan is being serviced.
Upgradation of accounts classified as NPA
All the loan or credit facility accounts of a borrower will be classified as NPA, in case any one of the accounts get classified as NPA and will continue to remain classified as NPA unless the overdues of all the loan accounts or credit facilities are fully repaid by the customer.
