What changed
RBI extended the January 2014 distressed assets framework to NBFCs, requiring them to create SMA sub-categories (SMA-0, SMA-1, SMA-2) for early stress identification. Systemically important NBFCs, deposit-taking NBFCs, and NBFC-Factors must report credit data to CRILC quarterly for exposures of ₹5 crore and above. SMA-2 status triggers mandatory JLF formation and corrective action plan.
What it means for you
NBFCs must now proactively monitor and report early signs of borrower distress, not just wait for NPA classification. Failure to report SMA status or attempts to evergreen accounts will attract accelerated provisioning and supervisory actions. This aligns NBFCs with the banking sector's framework, increasing transparency and forcing quicker resolution of stressed assets.
What you must do
- Implement systems to classify accounts as SMA-0, SMA-1, or SMA-2 based on overdue days and incipient stress signs.
- Report credit data (exposures ≥₹5 crore) to CRILC quarterly via XBRL or hard copy until XBRL is ready.
- Authenticate PAN details for all borrowers with exposure ≥₹5 crore from Income Tax records.
- Monitor SMA-1 and SMA-0 accounts closely and engage borrowers early to rectify deficiencies.
- Join JLF and formulate CAP immediately when an account is reported as SMA-2 by any lender.
Who it affects
All NBFCs (for SMA classification), Systemically important NBFCs (NBFC-ND-SI), deposit-taking NBFCs (NBFCs-D), and NBFC-Factors (for CRILC reporting), Borrowers with aggregate exposure of ₹5 crore and above from notified NBFCs, Joint Lenders' Forum participants
What are the SMA sub-categories and their overdue thresholds?
SMA-0: principal or interest payment not overdue for more than 30 days but showing signs of incipient stress; SMA-1: overdue between 31-60 days; SMA-2: overdue between 61-180 days.