Customer Education Literature
Newtap Finance Private Limited (previously known as Parfait Finance & Investments Private Limited)
Prudential norms on Asset Classification of Loan account as per guidelines issued by the RBI.
Newtap Finance Private Limited (previously known as Parfait Finance & Investments Private Limited) is registered with the Reserve Bank of India (RBI) as a non-deposit taking, non-banking financial company (NBFC).
With a view to increase awareness among the borrowers, consumer education literature has been placed by explaining the concepts of Overdue, Special Mention Account (SMA), Non-Performing Asset (NPA) classification and Upgradation to Standard asset.
The examples quoted in the document are illustrative and not exhaustive in nature and relate to general scenarios. The guidelines and clarifications issued by the RBI will prevail for implementation and may be amended from time to time by the RBI.
Ref: Prudential norms on Income Recognition, Asset Classification and provisioning pertaining to Advances – Clarifications (RBI/2021-2022-23/125 DOR.STR.REC.68/21.04.048/2021-22, dated November 12, 2021)
Definitions
I. Dues: Principal/interest/ any charges levied on the loan account which are payable within the due date stipulated as per the terms of sanction of the credit facility.
II. Overdue: Principal/interest/ any charges levied on the loan account which are payable but have not been paid within the due date stipulated as per the terms of sanction of the credit facility. In other words, any amount due to the NBFC under any credit facility is 'overdue' if it is not paid within the due date.
The company classifies borrower accounts as SMA/NPA as part of day-end process for the relevant date and the SMA/NPA classification date is the calendar date for which the day end process is run.
Classification of SMA and NPA
Lenders are required to recognize the incipient stress in borrower’s accounts immediately on Default, by classifying them as SMA. Such accounts if not regularized within 90 days gets classified as NPA. The basis of classification of SMA & NPA is as follows:
Loans other than revolving facilities | Loans in the nature of cash credit/overdraft | ||
SMA/NPA Categories | Basis for classification – principal or interest payment or any other amount wholly or partly overdue | SMA/NPA Categories | Basis for classification – Outstanding balance remain continuously in excess of the sanctioned limit or drawing power whichever is lower for a period of: |
SMA-0 | Upto 30 days |
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SMA-1 | More than 30 days and upto 60 days | SMA-1 | More than 30 days and upto 60 days |
SMA-2 | More than 60 days and upto 90 days | SMA-2 | More than 60 days and upto 90 days |
NPA | More than 90 days | NPA | More than 90 days |
An illustration of asset classification is given below:
Asset Classification | Date |
Original Due Date | 31 March 2022-23 |
SMA-0 | 31 March 2022-23 End of the day |
SMA-1 | 30 April 2022-23 End of the day |
SMA-2 | 30 May 2022-23 End of the day |
NPA | 29 June 2022-23 End of the day |
SMA/NPA classification: SMA/NPA classification is at borrower level as per the regulatory guidelines and hence, overdue in any one account of the borrower will result in reporting of the all the credit facilities of the borrower as SMA/NPA.
Upgradation of accounts: Loan accounts classified as NPAs are upgraded to ‘Standard’ asset only if the entire arrears of interest and principal pertaining to credit facilities are paid by the borrower. In case of borrowers having more than one credit facility from the lender, loan accounts shall be upgraded from NPA to standard asset category only upon repayment of entire arrears of interest and principal pertaining to all the credit facilities.
