In reference to the RBI circular having reference number RBI/2021-2022/125 DOR.STR.REC.68/21.04.048/2021-22 dated November 12, 2021, on Prudential norms on Income Recognition, Asset Classification and Provisioning and to ensure customers are aware of the due date of the repayment and the classification of their loan account in the event of default in payment of overdue, some of the important terms and conditions in this regard are explained as under:
- 1. POS (Principal Outstanding):
- The outstanding principal balance of a loan/credit facility is simply the total amount of principal outstanding in the particular loan which doesn't include the accrued interest, default interest, other charges, etc.
- 2. Overdue:
- Any amount due to the lender under any credit facility is 'overdue' if it is not paid on the due date agreed by the lender with the borrower. If there is any overdue in an account, the default/non-repayment is reported with the credit bureau companies like CIBIL, etc., and the CIBIL report of the customer will reflect defaults and its classification status.
- 3. DPD (Days Past Due):
- It indicates whether you have been consistent in your repayments and if you have missed any, how many installments you have missed and by how many days. With respect to a particular loan, the number of days till date for which any principal/interest/EMI or any of its installments for that loan is overdue and not paid as at day-end process.
- 4. SMA (Special Mention Account):
- The Borrower Loan accounts shall be downgraded to SMA classification defined below, upon failure of the Borrowers to pay any EMI by the due date or the Outstanding Dues or any other amount wholly or partly is overdue.
- 5. NPA (Non-performing Assets):
- A Loan account is classified as NPA upon failure of the Borrower to pay any EMI for a period of more than 90 days. Once the borrower is classified as NPA, the loan accounts shall remain classified as NPA until the entire arrears of interest and principal are paid in full by the Borrower.
Illustrative Example
If the due date of a loan account is March 31, 2021, and the full dues are not received before the lending institution executes the day-end process for that date, the account will be treated as overdue effective March 31, 2021.
SMA Sub-categories
| Category |
Basis for Classification |
| 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 |
Ref-SCL/FY-2025-26/April/004
1. SMA-0 (Special Mention Account - 0):
- Trigger Date: March 31, 2021
- Condition: Payment not received by end of day on the due date.
- Status: Account is tagged as SMA-0 on the same day.
2. SMA-1:
- Trigger Date: April 30, 2021
- Condition: Dues remain unpaid for 30 days continuously.
- Status: Account is tagged as SMA-1 upon day-end process on April 30, 2021.
3. SMA-2:
- Trigger Date: May 30, 2021
- Condition: Dues remain unpaid for 60 days continuously.
- Status: Account is tagged as SMA-2 upon day-end process on May 30, 2021.
4. NPA (Non-Performing Asset):
- Trigger Date: June 29, 2021
- Condition: Dues remain unpaid for 90 days continuously.
- Status: Account is classified as NPA upon day-end process on June 29, 2021.
6. Impact of Default on Credit Score
Failure to make timely payments can significantly impact your credit score, which is a critical factor in determining future loan approvals. A low credit score can lead to higher interest rates, reduced loan limits, or even rejection of loan applications. It is crucial to maintain financial discipline by making timely payments.
7. Importance of Financial Planning
Borrowers are encouraged to plan their finances efficiently to avoid missing loan repayments. Setting aside emergency funds, tracking expenses, and using loan repayment reminders can help maintain a healthy financial status and avoid unnecessary penalties or legal actions.
8. Customer Rights and Responsibilities
Customers have the right to:
- Receive clear and transparent information about loan terms and conditions.
- Request details about their loan status and repayment schedule.
- Dispute incorrect information in their loan records.
Customers have the responsibility to:
- Repay loans on time to avoid penalties.
- Notify SCL in case of any financial hardships affecting repayment.
- Regularly check their credit score and financial health.
Ref-SCL/FY-2025-26/April/004
9. Upgradation of Accounts classified as Non-Performing Asset (NPA)
An account classified as a Non-Performing Asset (NPA) can be upgraded to a standard account only when all overdue amounts of principal and interest are fully repaid by the borrower.
10. Treatment of Multiple NPA Accounts of a Borrower
In the case where a borrower has multiple loans/exposures with the Salora Capital:
- If any one of the accounts is classified as NPA, all other accounts of the borrower are also required to be classified as NPA, even if those accounts are currently regular.
- This is based on the principle of borrower-wise asset classification, not account-wise, as per RBI guidelines.
Ref-SCL/FY-2025-26/April/004
