Customers can have different kinds of accounts at banks. SMA is the term used to describe a bank account. SMA is utilized in the banking sector to identify the various bank accounts. What is SMA full form in the banking area? The official definition that is used for SMA refers to a Special Mention Account, which serves to classify different types of accounts in banks. This blog post, we’ll examine the ways in which SMA is utilized in the banking sector. Concept of SMA within the banking industry
SMA is a concept that was introduced by the Reserve Bank of India in 2014. SMA was first introduced through the Reserve Bank of India in 2014. This classification is crucial to banks in order to identify the accounts that aren’t performing. The banks will declare the accounts as not performing if they are not functioning properly. They will also review the accounts on a regular basis to minimize the risks of default. After examining banks’ accounts banks will decide on the appropriate strategy for the failing accounts.
Diverse SMA accounts based on the principal amount remaining as well as interest payments
- SMA-0 SMA-0 It has some indications of stress. Principal or interest payments are past due but not for more than thirty days.
- SMA-1 A principal, or rate of interest is past due for between 31 and 60 days.
- SMA-2– This category indicates that the principal sum or interest rate is due for payment by 61-90 days.
- SMA-NF SMA-NF Non-financial stressors are affecting the assets.
Impacts of SMA on SMA’s effects on the
Accounts in the SMA category affect customers in various ways, like:
- SMAs can lower the score on credit of customers.
- SMAs can affect the credit score of borrower.
Conclusion
This blog will explain SMA full form in banking industry as well as how it assists to categorize different bank accounts. The SMA concept helps banks to separate accounts into categories according to according to the principal and interest rate.