Consider the following statements about Special Mention Accounts SMA in the context of India Special...........

Economic Affairs Types of Banks and Banking

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Consider the following statements about Special Mention Accounts (SMA) in the context of India:

Special Mention Accounts are those assets/accounts that show symptoms of bad asset quality in the first 90 days itself
The Special Mention Account is an effort to identify stressed assets that are lying with a bank for more than two years.

Which of the statements given above is/are correct?

Both 1 and 2

Neither 1 nor 2

1 only

2 only

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Explanation:

The classification of Special Mention Accounts (SMA) was introduced by the RBI in 2014 to identify those accounts that have the potential to become an NPA/Stressed Asset. The logic of such a classification is because some accounts may turn NPA soon. Here, early identification will help to tackle the problem better. The Special Mention Accounts are usually categorized in terms of duration. For example, in the case of SMA-1, the overdue period is between 31 to 60 days. On the other hand, an overdue between 61 to 90 days will make an asset SMA-2. Hence statement 1 is correct, and statement 2 is incorrect.

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