Annexure

From:

Dear Sir,

With reference to the Credit facility/ies sanctioned to me/us vide sanction Letter ref No dated
_____________ and being availed by us today, l/ we confirm having understood the following
concepts and illustrative examples related to due dates, classification of our borrowal accounts as
SMA/NPA in the course of the conduct of the accounts.

Concepts/ clarifications/ Illustrative examples on due dates and specification of SMA / NPA
classification dates

Dues:
Mean, the principal / interest/ any charges levied on the loan account which are payable within
the period stipulated as per the terms of sanction of the credit facility.

Overdue:
Mean. the principal / interest/ any charges levied on the loan account which are payable, but have
not been paid within the period stipulated as per the terms of sanction of the credit facility In
other words, any amount due to the bank under any credit facility is 'overdue' if it is not paid on
the due date fixed by the bank.

Relevance of the Principle of 'First In First Out' (FIFO) in appropriation of payments into
the borrowal account:
The Principle of FIFO i.e., 'First In, First Out' accounting method is relevant to arrive at the No of
days of overdue for determining the SMA/ NPA status. The FIFO principle assumes that the
oldest outstanding dues in the loan account needs to be cleared first. The FIFO method thus
requires that what is due first must be paid by the borrower first. For example,
If in any loan account as on 01.02.2021 there are no overdues and an amount of Rs. X is due for
payment towards principal instalment/interest/charges , any payment being credited on or after
01.02.2021 in the loan account will be used to pay off the dues outstanding on 01 02 2021

Assuming that nothing is paidor there is partial payment (Rs Y) of dues during the month of
February , the overdue as on 01.03 2021 will be Rs .X-Y
Additionally, an amount of Rs.Z becomes due as on 01 03 2021, Now any payment /partial
payment into the account on or after 01 03.2021 will be first utilized to pay off the partial due of
01.02 2021 ( Rs X — Rs Y). If there is more recovery than the Rs X — Rs Y then after
recovering dues of 01.02.2021 , the remaining amount will be treated as recovery towards due
of01.03.2021

Age of oldest Dues

The age of oldest dues is reckoned in days from the date on which the oldest payment is due and
continues to remain unpaid. In the aforesaid illustration, if the Dues relating to 1st February 2021
remain unpaid till 01.03 2021, the age of the oldest dues is reckoned as 29 days on 02.03.2021
1
Classification as Special Mention Account (SMA) and Non-Performing Asset (NPA)
Lending institutions will recognize the incipient stress in loan accounts, immediately on Default,
by classifying them as Special Mention Accounts (SMA). The basis of classification of SMA /
NPA Category shall be as follows
Loans in the nature of Term Loans Loans in the nature of cash credit/overdraft

SMA Sub-categories Basis for SMA Sub-categories Basis for

classification — classification —
Principal or interest Outstanding balance
payment or any remains
other amount continuously in
wholly or partly excess of the
overdue sanctioned limit or
drawing power,
whichever is lower,
for a period of
SMA-O Up to 30 days

SMA-I More than 30 days SMA-I More than 30 days

and up to 60 da s and up to 60 days
SMA-2 More than 60 days SMA-2 More than 60 days
and up to 90 days and up to 90 days

Non-performing Asset:
Non-Performing Asset (NPA) is a loan or an advance where.
i. Interest and/ or instalment of principal remains overdue for a period of more than 90 days
in respect of a term loan,
ii. The account remains 'out of order' as indicated below, in respect of an Overdraft/Cash
Credit (OD/CC),
iii. The bill remains overdue for a period of more than 90 days in the case of bills purchased
and discounted,
iv. The instalment of principal or interest thereon remains overdue for two crop seasons for
short duration crops,
v. The instalment of principal or interest thereon remains overdue for one crop season for
long duration crops.
'Out of Order' Status .
An account shall be treated as 'out of order' if:
i. The outstanding balance in the CC/OD account remains continuously in excess of the
sanctioned limit/drawing power for 90 days, or
ii. The outstanding balance in the CC/OD account is less than the sanctioned limit/drawing
power but there are no credits continuously for 90 days, or the outstanding balance in the
CC/OD account is less than the sanctioned limit/drawing power but credits are not enough
to cover the interest debited during the previous 90 days period.

2
 Illustrative movement of an account to SMA category to NPA category based on delay /
non-payment of dues and subsequent up-gradation to Standard category at day end process
:

Due date of Payment Payment Age of SMA / SMA since NPA NPA
payment Date covers oldest NPA Date /SMA Categoriz Date
dues in Categorisati class date ation
days on
01 .01.22 01 .01.22 Entire dues 0 NIL NA NA NA
upto
01.01.22
01 .02.22 01 .02.22 Partly paid 1 SMA-O 01 .02.22 NA NA
dues of
01.02.22
01.02.22 02.02.22 Partly paid 2 SMA-O 01 .02.22 NA NA
dues of
01.02.22
01 .03.22 Dues of 29 SMA-O 01 .02.22 NA NA
01.02.22
not fully
paid
01.03.22 is
also due at
EOD
01.03.22
Dues of 1 SMA-O 01 .03.22 NA NA
01.02.22
fully paid ,
Due for
01.03.22
not paid at
EOD
01.03.22
No 31 SMA- 1 01 .02.22 NA NA
payment of
full dues of 03.03.22
01.02.22
and
01.03.22 at
EOD
03.03.22
Dues of 1 SMA-O 01 .03.22 NA NA
01.02.22
fully paid ,
Due for
01.03.22
not fully
3
 paid at
EOD
1.03.22
01 .04.22 No 60 SMA 1 01 .02.22/ NA NA
payment of 03.03.22
dues of
01.02.22
,01 .03.22
and amount
due on
01.4.22 at
EOD
01 .04.22
No 61 SMA 2 01 .02.22 NA NA
payment of /02.04.22
dues of
01.02.22 till
01.04.22 at
EOD
02.04.22
01 .05.22 No 90 SMA 2 01 .02.22 NA NA
payment of /02.04.22
dues of
01.02.22 till
01.05.22 at
EOD
01.05.22
No 91 NPA NA NPA 02.05.22
payment of
dues of
01.02.22 till
01.05.22 at
EOD
02.05.22
01.06.22 01.06.22 Fully Paid 93 NPA NA NPA 02.05.22
dues of
01.02.22 at
EOD
01 .06.22
01.07.22 01.07.22 Paid entire 62 NPA NA NPA 02.05.22
dues of
01 .03.22&
01.04.22 at
EOD
01 .07.22

4
01.08.22 01.08.22 Paid entire 32 NPA NA NPA 02.05.22
dues of
01 .05.22&
01.06.22 at
EOD
01 .08.22
01.09.22 01.09.22 Paid entire 1 NPA NA NPA 02.05.22
dues of
01 .07.22&
01.08.22 at
EOD
01 .09.22
01.10.22 01.10.22 Paid entire 0 Standard NA NA STD
dues of Account from
01.10.22
01.09.22& with No
01 .10.22 Overdues

I/we also understand that the aforesaid few examples are illustrative and not exhaustive in nature
covering common scenarios, and that, the IRACP norms and clarifications provided by RBI on
the subjects referred above will prevail

Yours faithfully,

(Borrower/s)

Date:
Place: Brigade Road