What changed
RBI introduced a framework requiring banks to classify incipient stress into SMA sub-categories (SMA-0, SMA-1, SMA-2) based on overdue days. It mandates JLF formation for accounts with aggregate exposure of Rs 1000 million or more when reported as SMA-2, and allows optional JLF for lower exposure or earlier stress stages. The framework also establishes CRILC for centralized credit data reporting.
What it means for you
Banks must proactively monitor and report early signs of stress using SMA categories, and form JLFs for large stressed accounts to coordinate corrective actions. This shifts the focus from reactive NPA management to early intervention, potentially reducing non-performing assets. Lenders need to align internal systems for SMA classification and CRILC reporting, and prepare for JLF agreements and CAP implementation.
What you must do
- Implement SMA sub-categories (SMA-0, SMA-1, SMA-2) for all loan accounts to identify incipient stress.
- Report credit information, including SMA status, to CRILC for all borrowers with aggregate exposure of Rs 50 million and above.
- Mandatorily form JLF for accounts with aggregate exposure of Rs 1000 million or more when reported as SMA-2.
- Sign JLF agreements and adopt Corrective Action Plans (CAP) as per IBA's master agreement and operational guidelines.
- Ensure consortium leaders or lenders with highest aggregate exposure convene JLF meetings promptly.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), All-India Term-lending and Refinancing Institutions (Exim Bank, NABARD, NHB, SIDBI), Borrowers with aggregate exposure of Rs 50 million and above, Lenders under Consortium and Multiple Banking Arrangements
What are the SMA sub-categories and their basis?
SMA-0: principal or interest not overdue >30 days but showing incipient stress; SMA-1: overdue 31-60 days; SMA-2: overdue 61-90 days.
When is JLF formation mandatory?
JLF formation is mandatory when any lender reports an account as SMA-2 to CRILC and the aggregate exposure of all lenders is Rs 1000 million or more.
What is the role of CRILC in this framework?
CRILC is a central repository set up by RBI to collect, store, and disseminate credit data. Banks must report credit information, including SMA classification, for borrowers with aggregate exposure of Rs 50 million and above.