SMA Classification and Early Warning Signals
Stress gets a tag from the first day of default. Here are the tags, what they trigger, and the signals that come before them.
A Special Mention Account (SMA) is a loan that has started to slip but is not yet an NPA. RBI makes banks tag it the moment a payment is missed, so that stress is visible weeks before the 90-day NPA line. The three tags, SMA-0, SMA-1 and SMA-2, are among the most tested facts in CCP's monitoring module.
This page covers the tags, the reporting and resolution rules that hang off them, and the early warning signals a credit officer watches. For the NPA rules and provisioning that follow day 90, see the IRAC norms page.
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SMA Categories
As restated in RBI's November 2021 clarification and carried into its current Resolution of Stressed Assets Directions.
SMA-0
Term loans and other non-revolving loans: amount overdue for
Up to 30 days
Cash credit and overdraft: balance continuously above the limit or drawing power (lower of the two) for
Not used
SMA-1
Term loans and other non-revolving loans: amount overdue for
More than 30 and up to 60 days
Cash credit and overdraft: balance continuously above the limit or drawing power (lower of the two) for
More than 30 and up to 60 days
SMA-2
Term loans and other non-revolving loans: amount overdue for
More than 60 and up to 90 days
Cash credit and overdraft: balance continuously above the limit or drawing power (lower of the two) for
More than 60 and up to 90 days
NPA
Term loans and other non-revolving loans: amount overdue for
More than 90 days
Cash credit and overdraft: balance continuously above the limit or drawing power (lower of the two) for
Out of order for 90 days
| Tag | Term loans and other non-revolving loans: amount overdue for | Cash credit and overdraft: balance continuously above the limit or drawing power (lower of the two) for |
|---|---|---|
| SMA-0 | Up to 30 days | Not used |
| SMA-1 | More than 30 and up to 60 days | More than 30 and up to 60 days |
| SMA-2 | More than 60 and up to 90 days | More than 60 and up to 90 days |
| NPA | More than 90 days | Out of order for 90 days |
What Changed in November 2021
The June 2019 framework wrote the buckets as 1-30, 31-60 and 61-90 days. RBI's 12 November 2021 clarification tightened how they are applied:
- check_circleSMA-0 became "up to 30 days" overdue, so the tag applies from the first day of default.
- check_circleCash credit and overdraft accounts got their own table, based on the balance staying above the sanctioned limit or drawing power, whichever is lower. There is no SMA-0 for them.
- check_circleTagging happens in the bank's day-end process, and the SMA or NPA date is that calendar date.
- check_circleLoan agreements must state the exact due dates and include examples of how SMA and NPA dates are worked out.
- check_circleAn NPA can be upgraded to standard only when the entire arrears of interest and principal are paid.
Every Loan, Every Size
SMA tagging applies to all loans, including retail loans, whatever the size of the exposure. The only exception is farm credit governed by crop-season norms. It is not a large-corporate rule, even though the reporting rules below are.
Classify These Accounts
Practice in the style of the exam. Assume no payment is made in between.
| Situation | Tag |
|---|---|
| Term loan instalment unpaid for 12 days | SMA-0 |
| Term loan interest overdue for 45 days | SMA-1 |
| Cash credit balance above drawing power continuously for 20 days | Standard (no SMA-0 for revolving accounts) |
| Cash credit balance above the limit continuously for 75 days | SMA-2 |
| Home loan EMI overdue for 61 days | SMA-2 |
| Term loan overdue for 95 days | NPA (substandard) |
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What Hangs Off the Tag: Reporting and Resolution
These rules come from RBI's June 2019 Prudential Framework, now part of the Commercial Banks (Resolution of Stressed Assets) Directions, 2025.
| Rule | Detail |
|---|---|
| CRILC reporting | Credit information, including SMA status, for every borrower with aggregate exposure of ₹5 crore and above, reported monthly to RBI's Central Repository of Information on Large Credits |
| Weekly default report | All defaults by borrowers with aggregate exposure of ₹5 crore and above, by close of business every Friday |
| Review Period | 30 days from the date of default. Lenders must review the account and decide a resolution strategy |
| Inter-creditor agreement | Signed during the Review Period when a plan is to be implemented with more than one lender. Decisions backed by 75% by value and 60% by number bind all signatories |
| Resolution deadline | Plan implemented within 180 days from the end of the Review Period, for accounts above the threshold (₹2,000 crore and above from 7 June 2019; ₹1,500 crore to ₹2,000 crore from 1 January 2020) |
| Missed deadline | Additional provision of 20% of total outstanding if not implemented within 180 days from the end of the Review Period, and another 15% (35% in all) if not done within 365 days from the start of the Review Period |
A Default, Step by Step
- 1
Day 1: default
An instalment is missed. The account is tagged SMA-0 in that night's day-end run.
- 2
Within 30 days: review
For a borrower in the framework, lenders review the account and choose a strategy: regularisation, restructuring, sale of the exposure, change in ownership or recovery.
- 3
Past 30 days: SMA-1
If still overdue, the tag moves up. Reporting continues through CRILC for exposures of ₹5 crore and above.
- 4
Past 60 days: SMA-2
The last stage before NPA. Monitoring tightens and recovery options are prepared.
- 5
Past 90 days: NPA
The account is classified substandard and IRAC provisioning starts. Asset classification is not frozen just because a resolution plan is being worked on.
Early Warning Signals (EWS)
SMA tags react to missed payments. Early warning signals try to catch trouble before a payment is missed. RBI's 2024 Master Directions on Fraud Risk Management require banks to run a Board-approved framework for early warning signals and red-flagged accounts, overseen by the Board's Risk Management Committee. The indicators themselves are set by each bank, drawing on transaction data, the borrower's financial performance, market intelligence and the borrower's conduct.
When one or more signals point to possible fraud, the account is red-flagged. RBI requires the bank to report a red-flagged account that meets its reporting threshold within seven days, and to decide within 180 days, ordinarily, whether it is a fraud or remove the red flag.
Signals a Credit Officer Watches
Each bank writes its own list. These are the kinds of signs that the CCP syllabus covers under monitoring tools:
- check_circleStock statements or financial data submitted late, or not at all. Drawings against a stock statement older than three months are irregular under the IRAC norms.
- check_circleLimits not reviewed or renewed on time. A delay of 180 days past the due date makes the account an NPA.
- check_circleFrequent overdrawals above drawing power, and cheques or mandates returned unpaid.
- check_circleTurnover in the account falling well below the sales the borrower declared.
- check_circleFunds routed through accounts at other banks, or payments to related parties that the sanction did not envisage.
- check_circleDelays in paying statutory dues, adverse audit remarks, or a credit rating downgrade.
FAQs
What are SMA-0, SMA-1 and SMA-2?expand_more
Early stress tags for loans before they become NPAs: overdue up to 30 days (SMA-0), more than 30 and up to 60 days (SMA-1), and more than 60 and up to 90 days (SMA-2).
Is there SMA-0 for cash credit accounts?expand_more
No. For cash credit and overdraft, RBI's table has only SMA-1 and SMA-2, based on the balance staying above the limit or drawing power, whichever is lower, for more than 30 or more than 60 days.
What is the CRILC reporting limit?expand_more
Banks report credit information, including SMA status, for all borrowers with aggregate exposure of ₹5 crore and above, monthly, plus a weekly report of defaults.
Does SMA apply to personal and home loans?expand_more
Yes. RBI applies SMA classification to all loans, including retail loans, irrespective of the size of exposure. Only crop-season farm loans follow their own norms.
What is the Review Period under RBI's stressed assets framework?expand_more
30 days from the date of default, during which lenders review the account and decide the resolution strategy. A plan must then be implemented within 180 days from the end of the Review Period for accounts in scope.
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