The CEA Wants a Rethink of the 90-Day Overdue Rule for MSME Loans: What SMA Means for You

On 9 October 2026, Chief Economic Adviser V. Anantha Nageswaran said something that matters to every MSME with a bank loan: the moment an account is classed as a special mention account (SMA), it almost ends up being treated as a bad loan, and that should change.

He was speaking at a national conference on inclusive growth organised by Sa-Dhan, the self-regulatory organisation for microfinance appointed by the Reserve Bank of India. It was a call for a review, not a rule change. But it puts a specific norm on the table, so it is worth knowing how it works today.

How the buckets work today

Banks sort loan accounts by how long a payment has been overdue:

• SMA-0: overdue up to 30 days
• SMA-1: overdue 31 to 60 days
• SMA-2: overdue 61 to 90 days
• NPA (non-performing asset): overdue beyond 90 days

SMA is an early-warning label. The account has not yet gone bad, but it has started to show stress. The 90-day line is what turns it into an NPA.

What the CEA actually said

His argument is that a single 90-day timeline for every borrower does not fit MSMEs, because businesses across sectors have different cash-flow cycles. A manufacturer waiting on large buyers and a service business with monthly billing do not get paid on the same rhythm. He said India should evolve norms that fit its own practices and cash-flow patterns rather than adopting a globally uniform benchmark. On the consequences of the label, he said an SMA classification makes an account a “de facto, if not de jure” NPA.

What has not changed

No regulator has announced a change. A senior banker told Business Standard that the RBI has traditionally been cautious about touching NPA classification, and pointed out that even gold loans, which are well secured, follow the standard 90-day norm. Agriculture is the exception: it has a separate framework that takes two crop cycles into account.

That is also the closest precedent for what the CEA is asking for: a rule that recognises that some borrowers earn on a longer cycle. Whether the same logic reaches MSMEs is an open policy question.

The related ask from MSME bodies

Three days later, on 12 October, the Federation of Indian Micro and Small & Medium Enterprises (FISME) made a connected suggestion: that the new SME Growth Fund should also help MSMEs whose loan accounts have slipped to SMA-2 or NPA, provided they have a credible revival plan. We explain the fund and what it is designed for in a separate piece, SME Growth Fund: Are You Small or Medium?

An expert quoted in the same report noted that a framework already exists for identifying financial stress in MSMEs and taking corrective action, including restructuring eligible loan accounts.

What this means for you today

Since the rule hasn’t moved, the practical lessons are about not reaching the labels in the first place:

• Know your own calendar. If your big customers pay on 60 to 90 days, your lender should hear that from you before a payment is due, not after it is missed.
• Treat SMA-0 as the signal. Thirty days overdue is the earliest the label can start. Talk to the bank then, not at SMA-2.
• Ask about restructuring options early. If a stress period is temporary, ask your lender what is available for eligible accounts before the account reaches NPA.
• Keep the paperwork for the cause. A delayed receivable from a large buyer, a documented order book, and a revival plan are what a lender reviews.

What to watch

Whether this goes anywhere depends on the RBI, not the government. Watch for any RBI discussion paper or circular on MSME-specific classification, and for how the SME Growth Fund’s eligibility guidelines treat stressed units. We will update this page if either moves.

Source: Business Standard (9 and 12 October 2026) reporting on the CEA’s remarks at the Sa-Dhan conference and FISME’s proposal.