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SMA-0 Stress Signs for Loan Assessment

The document lists 8 signs of stress that could categorize a bank account as Special Mention Account-0 (SMA-0): 1) Delays in submitting required documents or renewing facilities. 2) Actual sales/profits falling short of projections or prevention of stock audits. 3) Return of multiple checks due to insufficient balance. 4) Default on letters of credit, bank guarantees, or deferred payment guarantees. 5) Multiple requests to extend deadlines for security requirements. 6) Increased overdrafts on current accounts. 7) Borrower reporting business/financial stress. 8) Promoters pledging/selling shares due to financial stress.

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88 views1 page

SMA-0 Stress Signs for Loan Assessment

The document lists 8 signs of stress that could categorize a bank account as Special Mention Account-0 (SMA-0): 1) Delays in submitting required documents or renewing facilities. 2) Actual sales/profits falling short of projections or prevention of stock audits. 3) Return of multiple checks due to insufficient balance. 4) Default on letters of credit, bank guarantees, or deferred payment guarantees. 5) Multiple requests to extend deadlines for security requirements. 6) Increased overdrafts on current accounts. 7) Borrower reporting business/financial stress. 8) Promoters pledging/selling shares due to financial stress.

Uploaded by

6suraz9
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

SMA-0 Signs of Stress

Illustrative list of signs of stress for categorising an account as SMA-0:

1. Delay of 90 days or more in (a) submission of stock statement / other stipulated operating
control statements or (b) credit monitoring or financial statements or (c) non-renewal of facilities
based on audited financials.

2. Actual sales / operating profits falling short of projections accepted for loan sanction by 40%
or more; or a single event of non-cooperation / prevention from conduct of stock audits by banks;
or reduction of Drawing Power (DP) by 20% or more after a stock audit; or evidence of
diversion of funds for unapproved purpose; or drop in internal risk rating by 2 or more notches in
a single review.

3. Return of 3 or more cheques (or electronic debit instructions) issued by borrowers in 30 days
on grounds of non-availability of balance/DP in the account or return of 3 or more bills / cheques
discounted or sent under collection by the borrower.

4. Devolvement of Deferred Payment Guarantee (DPG) instalments or Letters of Credit (LCs) or


invocation of Bank Guarantees (BGs) and its non-payment within 30 days.

5. Third request for extension of time either for creation or perfection of securities as against
time specified in original sanction terms or for compliance with any other terms and conditions
of sanction.

6. Increase in frequency of overdrafts in current accounts.

7. The borrower reporting stress in the business and financials.

8. Promoter(s) pledging/selling their shares in the borrower company due to financial stress.

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