SMA (Special Mention Accounts) in CIBIL: Complete Guide

SMA (Special Mention Accounts) in CIBIL

Is it possible for lenders and banks to identify which account will potentially lead to default? Yes! Lenders can monitor accounts with a certain classification to assess credit risk and make informed decisions regarding quick personal loan approvals and interest rates. We are talking about SMAs, or Special Mention Accounts, which assist lenders and banks in classifying possible defaulters. Let’s read more about this and understand better about SMA’s in this article:

What is SMA (Special Mention Accounts)?

SMA, or Special Mention Account, refers to accounts in the banking system that show early signs of financial stress, which mostly happens due to irregularities in repayment. These accounts require close monitoring by lenders to prevent further deterioration. To facilitate early intervention, SMA accounts are categorized by the Reserve Bank of India (RBI). The three categories for accounts are SMA-0 (overdue for 1–30 days), SMA-1 (overdue for 31–60 days), and SMA-2 (overdue for 61–90 days) depending on how many days the payment is past due. By using this classification as an early warning system, banks can identify issues early on and take appropriate action. SMA accounts should be closely watched over and reviewed often to assist stop further delay and protect the bank’s finances. By identifying and managing these at-risk accounts, banks can mitigate the risk of defaults and maintain the stability of their loan portfolios.

Types of Special Mention Accounts

There are typically three types of SMAs:

SMA-0: Payments overdue for 1-30 days

SMA-1: Payments overdue for 31-60 days

SMA-2: Payments overdue for 61-90 days

This classification serves as an essential early warning system that helps banks identify possible problems early and take appropriate corrective action. SMA account monitoring and recurring reviews are essential to stopping further deterioration and maintaining the bank’s financial integrity. Through efficient identification and management of these susceptible accounts, financial institutions can mitigate the risk of default and maintain the stability of their loan portfolios. This strategy makes it easier to intervene promptly, which lowers the possibility that accounts would end up as non-performing assets (NPAs).

Importance of Special Mention Account in CIBIL

SMAs play a critical role in the credit assessment process as they indicate potential credit risks to lenders, influencing loan approvals and personal loan interest rates.

Indicate Potential Credit Risks: SMAs assist banks in identifying accounts that might experience financial issues, enabling them to precisely evaluate credit risks.

Early Signs of Financial Stress: Early warning indicators, such as late payments, are displayed on these accounts, assisting banks in identifying problems before they get out of hand.

Informed Loan Approvals: Banks can ensure they lend to creditworthy consumers by making better-informed decisions when granting new urgent personal loans by early identification of potential default accounts.

Influence Interest Rates: Bank interest rates are influenced by the risk level represented by SMAs; higher risk levels result in higher interest rates as a way to offset potential default losses.

Categorization of SMAs: Accounts are classified into SMA-0, SMA-1, and SMA-2 based on the days payments are overdue, providing a structured approach to monitoring.

Regular Monitoring: Continuous review of SMA accounts helps prevent further deterioration, protecting the bank’s financial health.

Also Read: What is NBFC? Types and Difference Between Bank vs NBFC

Criteria for Classified SMAs

The Reserve Bank of India (RBI) uses particular criteria to classify accounts as Special Mention Accounts (SMAs). These standards mainly concentrate on repayment irregularities and the duration of overdue payments, serving as indicators of potential financial stress

Repayment Irregularities: When there are changes to the agreed-upon terms of repayment, including missing or delayed installments, SMAs are identified.

Overdue Periods: The RBI categorizes SMAs into three classes based on the number of days the payment is overdue:

SMA-0: Payments overdue for 1-30 days.

SMA-1: Payments overdue for 31-60 days.

SMA-2: Payments overdue for 61-90 days.

Banks can more effectively keep an eye on accounts exhibiting early stress signals. Following these recommendations will help banks recognize which accounts need more attention and aggressive management to keep them from becoming non-performing assets (NPAs).

How SMAs Affect Your Credit Score?

SMAs negatively impact credit scores, reducing creditworthiness and affecting future borrowing capacity.

Credit Score Impact: SMAs’ warnings of possible repayment problems and financial instability might result in a considerable drop in your credit score.

Negative Signal to Credit Agencies: Your creditworthiness is impacted by late payments or inconsistencies flagged as SMAs, which appear negatively on your credit report.

Reduced Borrowing Capacity: SMAs lower credit ratings, which makes it more difficult to apply for credit cards, mortgages, or loans.

Potential for Higher Interest Rates: Lenders may offer credit at higher interest rates to compensate for perceived risk associated with SMAs.

Risk Assessment by Lenders: SMAs are viewed as indicators of higher default risk, influencing lending decisions.

Importance of Timely Payments: Maintaining timely payments is crucial to avoid SMAs and preserve a favorable credit score.

Long-term Credit Health: Managing finances responsibly to prevent SMAs helps maintain access to credit and favorable borrowing terms over time.

How to Check if Your Account is an SMA?

To check if your account is an SMA (Special Mention Account), follow these pointers:

Review Bank Communication: Banks typically notify customers if their account status changes to SMA.

Check Online Banking: Log in to your online banking portal to view account status updates, including SMA notifications.

Review Statements: Regularly check your bank statements for any mention of SMA status or special mentions.

Contact Customer Service: Reach out to your bank’s customer service for specific information regarding your account status.

Monitor Payment Status: Track your payment history to ensure all dues are settled promptly to avoid SMA classification.

Steps to Rectify an SMA Status

To rectify an SMA (Special Mention Account) status, follow these steps:

Identify Outstanding Dues: Review your account to pinpoint overdue payments contributing to SMA classification.

Contact Lender: Reach out to your lender to discuss repayment options or restructuring plans to settle outstanding dues.

Commit to Timely Payments: Ensure future payments are made promptly to prevent further escalation of SMA status.

Negotiate Terms: Discuss potential repayment schedules or settlements with your lender to clear dues effectively.

Monitor Progress: Regularly track your payment status and communicate with your lender to resolve SMA classification promptly.

Common Reasons for an Account to be Marked as SMA

These factors play a part in the classification of accounts as SMAs, which forces lenders to keep a careful eye on them and maybe modify the terms of lending to reduce risk.

Delayed Payments: If payments are consistently missed, an account may be classified as SMA.

Insufficient Funds: One factor contributing to SMA status is insufficient cash in the account to cover scheduled payments.

Financial Hardship: Schedules of payments may be disturbed by unforeseen financial difficulties, such as job loss or medical crises.

Cash Flow Issues: Temporary cash flow issues may arise for businesses, delaying loan repayments.

Market Volatility: Economic downturns or market fluctuations affecting business profitability may affect repayment capacity.

Impact of SMA on Loan Approval

Determining whether to approve a loan can be greatly impacted by classifying an account as an SMA. SMAs are seen by lenders as warning signs of potential repayment difficulties and financial instability. Banks consider the borrower’s credit history, including any SMAs, when evaluating loan applications.

Negative Signal: SMAs alert lenders to the possibility that the borrower may struggle to fulfill their financial obligations, which raises the possibility of default.

Creditworthiness Assessment: A borrower with SMAs can be viewed as less creditworthy, leading to stricter loan approval criteria or higher interest rates to mitigate perceived risk.

Impact on Terms: Lenders may offer less favorable terms or lower loan amounts to borrowers with SMAs, reflecting the higher risk associated with these accounts.

Overall, the presence of SMAs can hinder loan approval chances and affect the terms offered, underscoring the importance of maintaining a clean credit history for favorable borrowing conditions.

Also Read: Get Instant Loans Without CIBIL Score – Easy Online Process


Managing SMA effectively is essential for maintaining a healthy credit profile and securing favorable loan terms. Regular monitoring and proactive repayment strategies can mitigate the impact of SMAs on your financial standing. Understanding SMAs empowers individuals to take informed steps toward improving creditworthiness and financial stability.

Frequently Asked Questions

Why Would An Account Be Marked As An SMA?

An account is marked as an SMA primarily due to delayed payments or irregularities in repayment schedules. This classification helps banks identify accounts showing early signs of financial stress before they deteriorate further.

What Is The Difference Between An SMA And An NPA (Non-Performing Asset)?

An SMA indicates accounts with incipient stress where payments are overdue but have not yet become NPAs. NPAs, on the other hand, are accounts where payments are significantly overdue, typically beyond 90 days, indicating a higher risk of default,

Can An SMA Status Be Removed From My Credit Report?

Yes, if the account’s payment problems are fixed and payments are brought up to date, an SMA status can be deleted from your credit report. Once they have verified consistent payments and sound financial standing, lenders may upgrade the status.

How Does An SMA Classification Impact My Chances Of Loan Approval?

An SMA classification can negatively impact loan approval chances as it signals potential repayment difficulties and financial instability. Lenders may view borrowers with SMAs as higher risk, leading to stricter criteria or higher interest rates for new loans.

What Is SMA Recovery?

SMA recovery refers to the process of managing and resolving accounts classified as SMAs. It involves actions such as restructuring repayment terms, negotiating with borrowers, or taking legal steps to recover overdue payments and prevent the account from becoming an NPA.

How Is SMA Calculated?

SMA classification is determined based on the number of days an account’s payments are overdue:

SMA-0: Payments overdue for 1-30 days

SMA-1: Payments overdue for 31-60 days

SMA-2: Payments overdue for 61-90 days

What Is An SMA Audit?

A review procedure known as an SMA audit is used by banks and other financial organizations to evaluate the precision and categorization of SMAs in their holdings. It guarantees adherence to legal requirements and finds any inconsistencies that can have an impact on risk management procedures.

What Are The Advantages Of SMA?

Advantages of SMA include early detection of financial stress, allowing banks to take timely actions to prevent accounts from deteriorating into NPAs. It helps in proactive credit risk management, maintaining the health of loan portfolios, and preserving overall financial stability.


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