Oracle IAS, the best coaching institute for RBI grade B/NABARD/SEBI in Dehradun (Uttarakhand), brings to you views on important issues.
What is Special Mention Accounts (SMA)?
- The classification of Special Mention Accounts (SMA) was introduced by the RBI in 2014, to identify those accounts that has the potential to become an NPA/Stressed Asset. Logic of such a classification is because some accounts may turn NPA soon. Here, an early identification will help to tackle the problem better.
What is Special Mention Accounts?
- Special Mention Accounts are those assets/accounts that shows symptoms of bad asset quality in the first 90 days itself.
What is the difference between NPA and SMA?
- Remember that NPA has a duration of 90 days. On the other hand, the worst type of special mention account (SMA – 2) has less than 90 days’ duration.
- The Special Mention Account identification is an effort for early stress discovery of bank loans. It was introduced as a corrective action plan to contain stress. As per the SMA regulations, banks should identify potential stress in the account by creating a new sub-asset category viz. ‘Special Mention Accounts’ (SMA).
Classification of Special Mention Accounts
- The Special Mention Accounts are usually categorized in terms of duration. For example, in the case of SMA -1, the overdue period is between 31 to 60 days. On the other hand, an overdue between 61 to 90 days will make an asset SMA -2. In the case of SMA -NF, non-financial indications about stress of an asset is considered.
|SMA Sub Category||Classification basis|
|SMA – NF||Non-financial (NF) signals of stress
|SMA-0||Principal or interest payment not overdue for more than 30 days but account showing signs of incipient stress, Delay of 90 days or more in (a) submission of stock statement / other stipulated operating control statements or (b) credit monitoring or financial statements or (c) non-renewal of facilities based on audited financials.
|SMA- 1||Principal or interest payment overdue between 31-60days.
|SMA – 2||Principal or interest payment overdue between 61-90 days.|
‘Special Mention’ category of assets is not only on the basis of non-repayment or overdue position but also due to other factors that reflect sickness/irregularities in the account (SMA -NF).
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