From June, Indian Bank will send alerts daily to customers reminding them to pay their overdue amount.
Till now, such alerts were sent once in a month.
“As per change in the bank’s policy, loan accounts will be flagged as NPA on a daily basis instead of month-end flagging from June 2021. Pay your dues on or before the due date to avoid classification as overdue borrower (SMA/NPA) /penalties/negative credit score. Contact your home branch,” Indian Bank said in a recent notification to customers.
SMA is a special mention account and it gets triggered if an equated monthly instalment has not been paid for the month. When such payments are not made for 90 days, the account becomes a non-performing asset (NPA).
A senior official from Indian Bank said the notification had been issued based on the Reserve Bank of India’s (RBI) guidelines.
He pointed out that alerts would henceforth be sent on a daily basis when payment dates were missed, just like mobile companies do and the bank had sent an early notification on this so that the customers were prepared and it did not come as a surprise.
In a notification on September 14, 2020, the RBI instructed banks to automate their income recognition, asset classification and provisioning processes.
System upgradation
To ensure the completeness and integrity of the automated asset classification, provisioning calculation and income recognition processes, banks were advised to put in place or upgrade their systems to conform to the guidelines by June 30, 2021, the notification said.
All borrower accounts, including temporary overdrafts, irrespective of size, sector or types of limits, would be covered in the automated IT-based system for asset classification, upgrade, and provisioning processes. Banks’ investments will also be covered under the system, the RBI said.
It pointed out that the system-based asset classification would be an ongoing exercise for both downgrade and upgrade of accounts, and banks should ensure that the asset classification status was updated as part of the day-end process.
Consumer activist T. Sadagopan said while such alerts were welcome, what was required was detailed instructions to customers on how such automated systems would work.