Archive · 14 Aug 2025
What Happens When Your Personal Loan Turns NPA?
If you don't pay back your personal loan, it can become an NPA.
This means you haven't paid the loan back for a while.
Before it becomes an NPA, it goes through stages like SMA-0, SMA-1, and SMA-2, depending on how long you've missed payments.
If it becomes an NPA, your credit score goes down, making it harder to borrow money.
The bank might take legal action to get its money back.
However, if you pay everything you owe, the NPA status goes away.
Missing personal loan payments can lead to a loan being classified as a Non-Performing Asset (NPA).
A loan becomes an NPA if payments are missed for 90 days or more.
Before NPA status, loans go through Special Mention Account (SMA) categories: SMA-0, SMA-1, and SMA-2.
Consequences of NPA include a drop in credit score and potential legal action from the bank.
An NPA can be upgraded to a standard account once the borrower clears all arrears.
- Who
- Borrowers of personal loans.
- What
- A personal loan becomes an NPA when payments are missed for 90 days or more.
- When
- A loan becomes an NPA after 90 days of non-payment.
- Where
- N/A
- Why
- Failure to repay the loan as agreed.
Borrower
Bank
EMI Payments
Borrower
Avoid NPA status by paying EMIs on time.
Bank
If financial constraints exist, approach the bank for loan restructuring.
- NPA Definition
- Loan unpaid for 90+ days
- SMA-0
- Overdue for less than 30 days
- SMA-1
- Overdue for 30-60 days
- SMA-2
- Overdue for 60-90 days
- Credit Report Impact
- Credit score drop
- Recovery Process
- Legal notice, lawsuit, asset attachment possible
- Account Upgrade
- Upgraded to standard after arrears are cleared.