We present a simple guide to understanding crucial loan terms and classifications as per the latest regulatory guidelines:
- What does ‘Overdue’ mean?
When you take a loan, there is an agreed-upon date by which you need to make your repayments, whether it is principal or interest. Any amount due to an NBFC under any credit facility is treated as ‘overdue’ if it is not paid on the due date fixed by the NBFC.
- Special Mention Accounts (SMA)
When a loan becomes overdue, we track its status and recognize incipient stress immediately upon default. We classify these overdue accounts under ‘Special Mention Accounts’ (SMA) based on how long the amount has been overdue:
| SMA Sub-categories | Basis for classification: Principal or interest payment or any other amount wholly or partly overdue |
| SMA-0 | Up to 30 days |
| SMA-1 | More than 30 days and up to 60 days |
| SMA-2 | More than 60 days and up to 90 days |
- Non-Performing Assets (NPA)
If a loan remains unpaid for a period of more than 90 days, it is classified as a Non-Performing Asset (NPA). This classification signifies that the loan has a higher risk of non-recovery.
- Upgrading from NPA to ‘Standard’ Asset
Even if your loan is classified as an NPA, it can return to the ‘standard’ category. To achieve this, you must pay the entire arrears of interest and principal. If you have multiple credit facilities with us, all arrears across all facilities must be cleared to upgrade the accounts to standard status.
- Day-End Processes
The classification of borrower accounts as SMA or NPA is performed as part of our day-end process for the relevant date. The classification date will be the calendar date for which the day-end process is run. Thus, if your payment is not received before the process runs on your due date, the account will be flagged as overdue that same day.
Why is this important for you?
Being aware of these terms helps you manage your loans better, avoid unnecessary penalties, and maintain a good credit score to ensure continued financial benefits.
Illustrative Example
Consider X Company, which took a loan from an NBFC on January 1, 2026. The monthly repayment date is the last day of each month, starting January 31, 2026.
- On-Time Payment: If X Company makes the payment on or before January 31, the loan remains in good standing.
- Overdue & SMA-0: If it is February 10, 2026, and X Company has not made the January repayment, the loan is 10 days overdue. The NBFC classifies the account as SMA-0.
- SMA-1: By March 5, 2026, if the January repayment is still pending, the loan is 34 days overdue. The account shifts to SMA-1 (overdue more than 30 days but up to 60 days).
- SMA-2: By April 20, 2026, if the January payment remains pending, the loan is 80 days overdue. The account is now classified as SMA-2 (overdue more than 60 days but up to 90 days).
- NPA Classification: If the overdue period crosses 90 days (e.g., on May 2, 2026), the NBFC will classify the account as a Non-Performing Asset (NPA).
- Reverting to Standard Asset: If on May 10, 2026, X Company clears all overdue amounts (arrears of principal and interest), the account will be reclassified from NPA back to a ‘standard’ asset.