What Is SMA In Banking?

Are you curious to know what is SMA in banking? You have come to the right place as I am going to tell you everything about SMA in banking in a very simple explanation. Without further discussion let’s begin to know what is SMA in banking?

In the realm of banking, there are various terminologies and metrics used to assess the quality of loan portfolios and monitor potential risks. One such term is Special Mention Account (SMA). SMA classification is an important tool for banks to identify accounts that display signs of stress or early signs of potential default. In this blog, we will delve into the concept of SMA in banking, its significance, and how it impacts banks’ risk management practices.

What Is SMA In Banking?

Special Mention Account (SMA) refers to a classification used by banks to identify accounts that are exhibiting early signs of repayment difficulties. These accounts are not yet categorized as non-performing assets (NPAs) but require closer monitoring due to their deteriorating credit quality. The SMA classification acts as an early warning system, allowing banks to take timely action to prevent further deterioration and potential defaults.

SMA Classification

The classification of accounts into SMA categories is based on the duration of default or delay in repayment. The exact criteria for SMA classification may vary across jurisdictions, but it typically involves the following categories:

  1. SMA-0: This category includes accounts with principal or interest overdue between 1 to 30 days. These accounts indicate the first signs of stress and require close monitoring.
  2. SMA-1: Accounts falling under this category have principal or interest overdue for 31 to 60 days. The delay in repayment is considered moderate, and banks must take necessary measures to rectify the situation.
  3. SMA-2: This category comprises accounts with principal or interest overdue for 61 to 90 days. These accounts reflect a higher level of stress, and banks need to proactively address the situation to prevent further deterioration.

Significance And Impact

  1. Early Warning System: SMA classification serves as an early warning system for banks, allowing them to identify accounts that are at risk of default at an early stage. This helps banks take timely corrective actions and mitigate potential losses.
  2. Risk Management: SMA classification plays a crucial role in banks’ risk management practices. It helps banks allocate resources, closely monitor accounts, and proactively manage credit risks. By identifying SMA accounts, banks can assess the need for restructuring or provisioning and develop appropriate strategies to address potential defaults.
  3. Regulatory Compliance: Regulatory authorities often require banks to report and monitor SMA accounts as part of their regulatory compliance obligations. This ensures transparency, accountability, and adherence to prudent banking practices.
  4. Loan Portfolio Quality: SMA classification enables banks to assess the overall quality of their loan portfolios. By monitoring and managing SMA accounts effectively, banks can maintain a healthier portfolio and reduce the potential impact of defaults on their financial stability.
  5. Borrower Assistance: SMA classification provides an opportunity for banks to engage with borrowers who are facing repayment difficulties. By identifying these accounts early on, banks can offer suitable assistance, such as restructuring options or repayment plans, to support borrowers in overcoming financial challenges.


Special Mention Account (SMA) classification is a vital component of risk management practices in the banking sector. It helps banks identify accounts that exhibit early signs of repayment difficulties and require closer monitoring. By employing SMA classifications, banks can take timely actions to mitigate risks, maintain a healthy loan portfolio, and support borrowers in overcoming financial challenges. Through effective monitoring and management of SMA accounts, banks can strengthen their risk management frameworks and ensure financial stability.


What Is The SMA Concept In Banking?

SMA are those accounts that shows symptoms of bad asset quality once the account is overdue or before its being identified as NPA. There are three types of SMA – SMA 0, SMA1 and SMA 2. They are usually categorized in terms of duration.

What Is SMA0 SMA1 And SMA2?

There are four types of Special Mention Accounts – SMA-NF, SMA 0, SMA1, and SMA 2. The Special Mention Accounts are usually categorized in terms of duration. For example, in the case of SMA -1, the overdue period is between 31 to 60 days. On the other hand, an overdue between 61 to 90 days will make an asset SMA -2.

What Is SMA And Npa?

The bank recognizes incipient stress in borrower accounts by classifying them as Special. Mention Account (SMA) / Non-Performing Asset (NPA) as per the norms given below: Special Mention Account (SMA)1. Special mention accounts shall be classified as per following categories: Loans in the nature of Term Loans.

What Is SMA Showing In Cibil?

What does SMA mean in CIBIL report? SMA or Special Mention Account is one of the four types of DPD asset classification. It is a special account created for reporting Standard Accounts moving toward Sub-Standard.


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