Key Highlights of NPA Policy for
Mangalam Industrial Finance Limited

  1. Definition of NPA :Non-Performing Asset (NPA) refers to a loan or advance where:
    1. Interest or principal remains overdue for more than 90 days in respect of term loan,
    2. The account remains "out of order" for more than 90 days, or
    3. The bill remains overdue for more than 90 days in the case of an overdraft or cash credit (OD/CC) account.
  2. Classification of NPAs :
    1. Sub-standard Assets: Assets which have remained NPA for a period less than or equal to 12 months.
    2. Doubtful Assets: Assets which have remained in the sub-standard category for a period of 12 months.
    3. Loss Assets: Assets where loss has been identified by the bank or NBFC or internal or external auditors or RBI inspection, but the amount has not been written off wholly.
SMA Sub-categories Basis for classification - Principal or interest payment or any other amount wholly or partly overdue
SMA-0 Upto 30 days
SMA-1 More than 30 days and upto 60 days
SMA-2 More than 60 days and upto 90 days
  1. Transparent Disclosure :Commitment to transparently disclose asset classification, including NPAs, in financial statements and reports, providing stakeholders with visibility into the asset quality and risk profile.
  2. Timely Resolution of Stressed Assets :Emphasis on the timely resolution of stressed assets to prevent further deterioration, promoting financial stability and efficiency in operations.
  3. Provisioning Requirements :Adherence to provisioning requirements as per RBI guidelines, ensuring adequate coverage for potential losses arising from NPAs and maintaining financial soundness.
  4. Customer Communication and Support :Proactive communication with customers regarding the status of their loan accounts, including any NPA classification, and provision of support in resolving issues to mitigate adverse impacts.
  5. Compliance with Regulatory Guidelines :Commitment to strict adherence to regulatory guidelines provided by the RBI for NPA classification, provisioning, and disclosure, ensuring compliance and transparency.
  6. Risk Management Practices :Implementation of robust credit risk management practices, including thorough loan underwriting, regular monitoring of borrower repayment behavior, and proactive resolution of stressed assets to mitigate risks.
  7. Impact on Borrowers :Education and awareness initiatives for borrowers regarding the potential consequences of NPA classification, such as additional charges, higher interest rates, and impact on creditworthiness, fostering responsible borrowing behavior.
  8. Monitoring and Review Mechanisms :Establishment of robust monitoring and review mechanisms for NPA accounts to assess the effectiveness of risk management measures, address emerging risks promptly, and safeguard the financial health of Mangalam Industrial Finance Limited
  9. By incorporating these key highlights into the NPA policy, Mangalam Industrial Finance Limited can effectively manage NPAs, uphold regulatory compliance, and maintain a healthy loan portfolio while fostering trust and transparency with stakeholders.

Definition of DPD (Days Past Due)

DPD, or Days Past Due, is a term used by banks and financial institutions to measure the number of days by which a borrower has exceeded the due date for making payments on a loan or credit facility.

For example, if your monthly loan payment is due on the 1st of every month and you make the payment on the 5th, then your DPD would be 4 days past due.

DPD is an important indicator of your payment behavior and financial responsibility. Lenders use DPD to assess the risk of potential defaults and to monitor the repayment performance of borrowers.

Understanding your DPD can help you stay on top of your financial obligations and avoid falling into arrears. It's important to make payments on time to maintain a good credit score and avoid additional charges or penalties imposed by the lender. If you are unable to make a payment on time,it's advisable to communicate with your lender and explore alternative repayment options to avoid further consequences.

NPA accounts upgradation

Upgradation of NPA (Non-Performing Asset) accounts refers to the process where a loan account, previously classified as an NPA due to overdue payments, is restored to a performing status by the lender. Here's what customers need to know about the upgradation process:

  1. Assessment of Financial Health :Before considering upgradation, the lender assesses the borrower's financial health, repayment capacity, and willingness to repay. This assessment may involve reviewing the borrower's income, expenses, assets, and liabilities.
  2. Criteria for Upgradation :The decision to upgrade an NPA account is based on various factors, including the borrower's repayment history, financial stability, and adherence to the revised repayment schedule, if any.
  3. Positive Payment Behavior :Upgradation typically occurs when the borrower demonstrates a consistent track record of timely payments and fulfills conditions set by the lender for upgradation.
  4. Approval Process :The decision to upgrade an NPA account is approved by the lender's internal authorities, following due diligence and compliance with regulatory guidelines.
  5. Benefits of Upgradation : Upgradation of an NPA account benefits the borrower by improving their credit profile, reducing the negative impact on their credit score, and restoring their access to credit facilities at favorable terms.
  6. Communication from Lender :The lender communicates the upgradation of the NPA account to the borrower, along with any changes to the terms and conditions of the loan agreement.
FAQs for Customers on NPA Classification for NBFCs
  1. What is an NPA (Non-Performing Asset) in the context of NBFCs?
    An NPA refers to a loan or advance where interest or principal payments remain overdue for more than 90 days.
  2. How does NPA classification affect me as a borrower from an NBFC?
    NPA classification indicates that your loan account is in default or has not been serviced as per the agreed terms. It may lead to additional charges, higher interest rates, and impact your credit score.
  3. What should I do if my loan account is classified as an NPA?
    If your loan account is classified as an NPA, it's essential to communicate with the NBFC and discuss potential solutions, such as loan restructuring or repayment plans, to address the overdue payments and resolve the situation.
  4. Will NPA classification impact my ability to borrow in the future?
    Yes, NPA classification can negatively impact your creditworthiness and make it challenging to borrow from financial institutions in the future. It's essential to address NPA classification promptly to minimize its impact on your credit profile.
  5. Can I request loan restructuring if my account is classified as an NPA?
    Yes, you can request loan restructuring from the NBFC if your account is classified as an NPA. However, approval for restructuring will depend on various factors, including your repayment history and financial situation.
  6. What happens if I continue to default on my loan payments after NPA classification?
    Continued default on loan payments after NPA classification can lead to legal action by the NBFC, including asset seizure or foreclosure proceedings. It's crucial to take proactive steps to address the default and prevent further escalation of the situation.
  7. How can I avoid NPA classification on my loan account?
    To avoid NPA classification, ensure timely repayment of your loan instalment’s as per the agreed schedule. If you encounter financial difficulties, communicate with the NBFC at the earliest opportunity to explore potential solutions.
  8. Will my credit score be affected if my account is classified as an NPA?
    Yes, NPA classification can have a negative impact on your credit score, making it harder to access credit in the future. It's essential to address NPA classification promptly to mitigate its impact on your credit profile.
  9. Are there any charges associated with NPA classification?
    Yes, NBFCs may impose additional charges, such as penal interest or late payment fees, on NPA accounts. It's essential to review your loan agreement for details on associated charges.
  10. Where can I find more information about NPA classification and its implications?
    You can refer to the loan agreement provided by the NBFC or contact their customer service team for more information about NPA classification and its implications for your loan account.

Copyright © 2024 Mangalam Industrial Finance Limited All rights reserved. — Designed & developed by Eminent Digitals