Consumer Education Literature

The Reserve Bank of India vide its circular no. RBI/DoR/2023-24/106 DoR.FIN.REC.No.45/03.10.119/2023-24 on Scale based regulations dated October 19, 2023 and other circulars previously issued ‘Prudential norms on Income Recognition, Asset Classification and Provisioning, pertaining to Advances – Clarifications’ dated February 15, 2022 and November 12, 2021 have clarified and/or harmonised certain aspects relating to SMA / NPA classification dates, dates of overdue, etc. with a view to bring about uniformity and common understanding regarding the implementation of the guidelines on IRACP in a harmonised manner.

With a view to increase awareness amongst the borrowers, placed herewith are concepts / clarifications / illustrative examples on due dates and specification of Special Mention Account (SMA) / Non-Performing Asset (NPA) classification dates.

Below is the detailed write-up on date of overdue, SMA and NPA classification and upgradation of NPA and day-end process for calculation of calculation of the same.

What is Due date/repayment date?

It is the date on which the principal / interest / any charges levied on the loan account are payable to Saarathi Finance and Credit Private Limited (hereinafter referred to as the “Company”/ “Saarathi Finance”), as mentioned in sanction terms/loan agreement.

What is Overdue and Date of Overdue?:

Any amount due to Saarathi Finance under any credit facility shall be treated as overdue if it is not paid on the due date. Borrower accounts shall be flagged as an overdue account by Saarathi Finance as part of the day-end process for the due date, and the date of overdue shall be the calendar date for which the day-end process is run.

Example: If the due date of a loan account for making repayment is March 31, 2025, and full dues are not received before Saarathi Finance runs the day-end process for this date, the date of overdue shall be March 31, 2025.

What is POS (Principal Outstanding)?:

The outstanding principal balance of a loan/ credit facility is simply the total amount of principal amount outstanding in the particular loan which doesn’t include the accrued interest, default interest, other charges etc.

How classification as Special Mention Account (SMA) is done?:

Classification of the borrower account as SMA shall be done as part of day-end process for the relevant date and the SMA classification date shall be the calendar date for which the day-end process is run.

The basis for classification of SMA/NPA categories shall be as follows:

When will an account move into SMA or NPA (Examples)?:

• If due date of a loan account is March 31, 2025, and full dues are not received before Saarathi Finance runs the day-end process for this date, the date of overdue shall be March 31, 2025 and will be tagged as SMA-0.
• If it continues to remain overdue, then this account shall get tagged as SMA-1 upon running day-end process on April 30, 2025 i.e. upon completion of 30 days of being continuously overdue. Accordingly, the date of SMA-1 classification for that account shall be April 30, 2025.
• Similarly, if the account continues to remain overdue, it shall get tagged as SMA-2 upon running day-end process on May 30, 2025 and if continues to remain overdue further, it shall get classified as NPA upon running day-end process on June 29, 2025.

When Upgradation from Non-Performing Asset (NPA) to standard is done?:

The loan account classified as NPA can be upgraded as “Standard” only if the entire arrears of principal and interest amount due are paid in full and there is NIL arrears upon running day end process of that calendar date.

What is the impact on the borrower if the account is slipped to SMA/NPA and what is the effect of NPA account on the credit rating?:

• As per the extant regulatory guidelines, the company has to report the account as SMA/NPA to Credit Bureaus from time to time.
• Credit report will reflect the overdue amount, which may impact the credit score negatively, eventually creating hindrance for the customer for availing further credit facility from any Banks and Financial institutions.