SMA full form in banking is Special Mention Accounts. These are the accounts or assets that show signs of poor asset quality in the first 90 days or so before they are recognized as NPAs. The Reserve Bank of India first introduced the term SMA in the year 2014. The classification of SMA was done to detect those accounts which have the potential to become stressed/NPA assets.
However, there are four types of SMA classified: SMA 0, SMA-NF, SMA2, and SMA1. In terms of duration, special mention accounts vary. For instance, the overdue period is between 31 to 60 days in the case of SMA-1. In the case of SMA-2, on the other hand, an overdue between 61 to 90 days falls into the SMA-2 asset category. In contrast, a non-financial indication of the stress of an asset is considered in the case of SMA-NF.
Purpose of SMA
Special Mention of SMA Identification Account is an effective method for the potential discovery of bank loans at an early stage. It was formed as a remedial action plan to contain the stress. As per the SMA guidelines, banks should observe potential stress in the account by creating a new sub-asset category.