Banking and Insurance - Laws and Practice · Performing and Non Performing Assets

SMA-0, SMA-1 and SMA-2: Early Recognition of Stress

Updated 11 October 2026

A Special Mention Account (SMA) is a loan that is not yet an NPA but shows early signs of stress. RBI classifies it by days overdue: SMA-0 for 1 to 30 days, SMA-1 for 31 to 60 days and SMA-2 for 61 to 90 days. After more than 90 days, it becomes an NPA.

Understand Special Mention Accounts and Early Recognition of Stress

A bank loan is either a performing asset or a non-performing asset (NPA). A loan turns into an NPA when interest or principal stays overdue for more than 90 days. By then, much of the damage is done. RBI wants banks to spot trouble earlier, while recovery is still possible.

That is the idea behind Special Mention Accounts (SMA). An SMA is a standard (performing) account that shows early signs of stress. It is a warning stage, not an NPA. The bank does not make NPA-level provisions and does not stop income recognition on it merely because it is an SMA. The stage is for monitoring and corrective action.

RBI's framework for early recognition of financial stress sets three sub-categories. For term loans, they are based on how long the principal, interest or any other amount due has stayed overdue. SMA-0 covers 1 to 30 days. SMA-1 covers 31 to 60 days. SMA-2 covers 61 to 90 days. The count is of days overdue, so a term loan is not an SMA if nothing is overdue.

Revolving facilities such as cash credit and overdraft have no fixed due date, so the test is different. SMA-0 for a revolving facility is triggered by early signs of stress in the account, for example no credits for 30 days or other stress indicators. SMA-1 and SMA-2 then follow the continuous-excess test. SMA-1 applies when the outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for 31 to 60 days. SMA-2 applies when the excess continues for 61 to 90 days. Use the test for the facility type given in the question.

Do not mix this with the NPA norm. A revolving account is also treated as NPA if there are no credits for 90 days, or if the credits do not cover the interest debited during that period. These are NPA tests, not SMA-1 or SMA-2 triggers.

SMA reporting to the Central Repository of Information on Large Credits (CRILC) applies to borrowers with aggregate exposure of ₹5 crore and above. Banks report such accounts so that the system can see stress building across lenders. Under the 2014 framework, SMA-2 cases of ₹5 crore and above called for lenders to form a joint lenders' forum (JLF) and take corrective action. That approach has since been superseded by the 2019 prudential framework for resolution of stressed assets. The key exam link: SMA is the stage before NPA, and the 90-day line separates them.

Key rules to remember

SMA-0: Term loan: principal or interest overdue for 1 to 30 days; Standard account. Early sign of stress. Not an NPA. For a revolving facility, SMA-0 is triggered by early signs of stress, such as no credits for 30 days or other stress indicators.
SMA-1: Term loan: principal or interest overdue for 31 to 60 days; Standard account. Stress is building.
SMA-2: Term loan: principal or interest overdue for 61 to 90 days; Last stage before NPA. Resolution action should begin.
NPA line: Overdue for more than 90 days = NPA; Day 90 is still SMA-2. Day 91 is NPA.
SMA test for revolving facilities: SMA-0: early signs of stress, such as no credits for 30 days or other stress indicators. SMA-1: outstanding continuously above the lower of sanctioned limit and drawing power for 31 to 60 days. SMA-2: the same continuous excess for 61 to 90 days.; SMA-1 and SMA-2 follow the continuous-excess test. No credits for 90 days, or credits not covering the interest debited in that period, is an NPA test, not an SMA-1 or SMA-2 trigger.
Days overdue: Days overdue = Reporting date − Due date; Count from the first day after the due date when the amount remains unpaid.
CRILC reporting threshold: Aggregate exposure of ₹5 crore and above; SMA reporting to CRILC applies to such borrowers. The JLF and corrective action framework for SMA-2 cases of ₹5 crore and above belongs to the 2014 framework, now superseded by the 2019 prudential framework.

How to solve Special Mention Accounts and Early Recognition of Stress questions

Use the same short method for any SMA question, whether it asks for classification, a date or an explanation.

1Identify the facility type: term loan or revolving facility such as cash credit or overdraft.
2For a term loan, find the overdue amount and the due date. For a revolving facility, check for early signs of stress and whether the balance stays above the limit or drawing power, whichever is lower.
3Count the days overdue up to the reference date. Start counting after the due date. For a revolving facility, count the days of continuous excess.
4Place the count in a band. For a term loan: 1 to 30 is SMA-0, 31 to 60 is SMA-1, 61 to 90 is SMA-2, and more than 90 is NPA. For a revolving facility: early signs of stress, such as no credits for 30 days, point to SMA-0, 31 to 60 days of continuous excess is SMA-1 and 61 to 90 days is SMA-2. The 90-day no-credit and interest-not-covered tests belong to NPA classification.
5State the status clearly: standard but stressed (SMA) or non-performing (NPA).
6Name the consequence: monitoring, reporting and corrective action for SMA; NPA provisioning and income recognition rules after 90 days. For borrowers with aggregate exposure of ₹5 crore and above, add CRILC reporting.
7If asked for a date, add the band limits to the due date. For example, SMA-1 starts 31 days after the due date and NPA status starts after day 90.

Quickest way: Band-and-line shortcut

When to use it: Use this for short classification questions or a numerical question with dates.

Remember the numbers 30, 60, 90. Each band ends there.
Check the day count against these three numbers only.
Mark day 90 as the last day of SMA-2. Day 91 is NPA.
Write one line of consequence: SMA is a warning and NPA is a classification with provisioning.
For revolving accounts, say that SMA-1 applies when the limit or drawing power is continuously exceeded for 31 to 60 days and SMA-2 for 61 to 90 days. Keep the no-credit and interest-not-covered tests for NPA.

Common mistakes in Special Mention Accounts and Early Recognition of Stress

Treating SMA as the same as NPA.
Both words describe a troubled account and students merge them.
Fix: Say that SMA is a standard account with early stress. NPA starts only after 90 days overdue.
Placing day 90 in the NPA category.
Students read 90 days as the cut-off and forget the rule is more than 90 days.
Fix: Remember that 61 to 90 days is SMA-2. An account becomes NPA only when overdue for more than 90 days.
Mixing up the bands, for example SMA-1 as 1 to 30 days.
The numbering 0, 1, 2 is confused with the day ranges.
Fix: Learn SMA-0 as 1 to 30, SMA-1 as 31 to 60 and SMA-2 as 61 to 90 for term loans.
Using the term loan day-count for a cash credit or overdraft account, or treating no credits as an SMA trigger.
Revolving facilities have no fixed due date, so the test looks different, and the NPA tests get mixed with the SMA bands.
Fix: For these accounts use the continuous excess over the lower of limit and drawing power: 31 to 60 days is SMA-1 and 61 to 90 days is SMA-2. Keep the no-credit and interest-not-covered tests for NPA classification.
Saying banks stop income recognition or make full NPA provisions at SMA stage.
Students carry NPA consequences back to the earlier stage.
Fix: At SMA stage the account remains standard. The focus is on monitoring, reporting and corrective action.
Writing only definitions without applying the facts.
Students recall theory but do not link it to the dates in the case.
Fix: Count the days, name the band, state the conclusion, then add the compliance step.

Worked examples

Example 1

A term loan instalment of ₹4,00,000 was due on 10 March and remains unpaid. On 25 April of the same year, classify the account and state its status.

Show the solution

The instalment was due on 10 March and is unpaid.
Days from 10 March to 31 March = 21 days.
Days in April up to 25 April = 25 days.
Total days overdue = 21 + 25 = 46 days.
46 days falls in the 31 to 60 band, which is SMA-1.
The account is still a standard account because it has not been overdue for more than 90 days.

Answer: The account is SMA-1 on 25 April, with 46 days overdue. It is standard but stressed, not an NPA.

Example 2

A bank asks a company secretary to explain the difference between an SMA-2 account and an NPA, using an account overdue for 90 days and another overdue for 91 days.

Show the solution

Both accounts have an overdue amount of principal or interest.
The first account is overdue for 90 days, which falls in the 61 to 90 day band, so it is SMA-2.
The second account is overdue for 91 days, which is more than 90 days, so it is an NPA.
SMA-2 is a standard account in an early warning stage. The bank monitors it, reports it where required, and starts resolution planning.
The NPA account is classified as non-performing. Income recognition and provisioning norms for NPAs then apply.

Answer: The 90-day account is SMA-2 and still standard. The 91-day account is an NPA. One day separates them, and the consequences are very different.

Exam tips

Write the three bands as 1 to 30, 31 to 60 and 61 to 90 near the start of your answer, then apply them to the facts.
In case questions, show the day count in one line. Examiners give credit for method as well as the final label.
State clearly that SMA is not an NPA and that NPA means overdue for more than 90 days.
Mention the revolving-facility test if the case involves cash credit or overdraft.
End with the compliance point: early reporting, monitoring and corrective action to prevent slippage into NPA.

Practice questions from Performing and Non Performing Assets

Special Mention Accounts and Early Recognition of Stress: frequently asked questions

What is a special mention account in banking?

It is a standard loan account that is overdue but not yet an NPA. RBI uses SMA categories to flag early stress so banks can act before the account turns bad.

What is the difference between SMA and NPA?

An SMA has an amount overdue for 1 to 90 days and remains a standard asset. An NPA is overdue for more than 90 days and is classified as non-performing, with income recognition and provisioning consequences.

How are SMA-0, SMA-1 and SMA-2 classified?

For term loans, SMA-0 is 1 to 30 days overdue, SMA-1 is 31 to 60 days and SMA-2 is 61 to 90 days. The classification depends on how long the amount has remained overdue.

How is SMA decided for cash credit or overdraft accounts?

Since there is no fixed due date, SMA-1 applies when the outstanding stays continuously above the lower of the sanctioned limit and drawing power for 31 to 60 days. SMA-2 applies for 61 to 90 days. No credits for 90 days, or credits not covering the interest debited, is a test for NPA classification, not an SMA trigger.