Understanding DPD, SMA and NPA: How Banks Classify Debt

The Reserve Bank of India outlines clear prudential norms regarding the classification of stressed assets. For both individual and commercial borrowers, understanding these stages helps determine the appropriate window for negotiation.

Days Past Due (DPD) measures the continuous delay in servicing an installment. Once an account crosses 30 days of overdue, it enters Special Mention Account-1 (SMA-1) and subsequently SMA-2 at 60 days.

Upon reaching 90 days of continuous non-payment, the loan account is classified as a Non-Performing Asset (NPA). It is at this stage that formal legal remedies—including Section 138 notices, arbitration, or SARFAESI actions—are typically contemplated by lenders.