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

Kaveri Engineering has a cash credit limit of Rs 50 lakh with a bank. The outstanding balance has remained continuously in excess of the sanctioned limit for 65 days, and there are no other overdues. Which classification applies to this account under the RBI SMA framework?

The account is SMA-2. For cash credit and other revolving facilities, SMA status is based on the balance staying continuously above the sanctioned limit or drawing power, whichever is lower. An excess of 61 to 90 days is SMA-2, and NPA status applies only beyond 90 days.

  1. ASMA-1, because overdue is above 30 days
  2. BSMA-2, because the limit has been continuously exceeded for 61 to 90 daysCorrect
  3. CNPA, because the limit has been exceeded for more than 60 days
  4. DSMA-0, because there is no principal or interest overdue

Explanation

For revolving credit facilities such as cash credit, the SMA classification is based on the outstanding balance remaining continuously in excess of the sanctioned limit or drawing power, whichever is lower. SMA-1 is 31 to 60 days and SMA-2 is 61 to 90 days. An overage of 65 days therefore makes it SMA-2. NPA status would arise only after 90 days.

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