Objectives:

The Reserve Bank of India vide Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025 dated 28 November 2025, has stipulated that with a view to increasing awareness among its borrowers, NBFCs should place customer education literature on their websites, explaining with examples, the concepts of date of overdue, SMA and NPA classification and upgradation.

Concepts:

Due:

Indicates the principal/interest/any amount levied on the loan account which are payable within the period stipulated as per the terms of credit facility extended by the Company.

Due date/repayment date

It is the date on which the principal / interest / any charges levied on the loan account are payable as mentioned in the Loan Agreement.

Overdue

An amount is to be treated as overdue if it is not paid on the due date fixed by the NBFCs. The exact due dates for repayment of a loan, frequency of repayment, breakup between principal and interest, shall be clearly specified in the Loan Agreement. The borrower accounts shall be flagged as overdue by the lending institutions as part of their day-end processes for the due date.

Non-Performing Asset (NPA)

The loan account shall be classified as Non-Performing Asset (NPA) when Principal or interest payment or any other amount remains overdue for a period of more than 90 days.

Classification of Special Mention Account ("SMA") and Non-Performing Assets ("NPA")

SMA classification

The Company shall recognize incipient stress in loan accounts, immediately on default, by classifying such assets as special mention accounts (SMA) and Non-Performing Asset (NPA) as per the categories specified below:

SMA sub categories	Basis for classification - Principal or interest payment or any other amount wholly or partly overdue
SMA 0	Upto 30 days
SMA 1	More than 30 days upto 60 days
SMA 2	More than 60 days upto 90 days

Illustration:

If the instalment due date of a loan account falls on March 31, 2025, then the SMA/NPA classification for the respective due amount will be done upon running day end processes. The indicative SMA/NPA classification of the amount shall be as follows:

Due Date	Payment Status	Days Overdue	Upon running day end process on	SMA/NPA Classification
31 March, 2025	Amount due on 31 March, 2025 not paid in full	Upto 30 days	31 March, 2025	SMA - 0
	Amount due on 31 March, 2025 still not paid in full and the subsequent due amount also not paid	More than 30 days and upto 60 days	30 April, 2025	SMA - 1
	Amount due on 31 March, 2025 still not paid in full and the subsequent due amount also not paid	More than 60 days and upto 90 days	30 May, 2025	SMA – 2
	Amount due on 31 March, 2025 still not paid in full and the subsequent due amount also not paid	More than 90 days	29 June, 2025	NPA