There is a quiet shift taking place in the way Indians think about credit. For many, borrowing is no longer reserved for buying a house or meeting a once-in-a-lifetime expense. It has become an everyday financial tool that helps people pursue opportunities, manage temporary cash flow gaps and deal with life’s uncertainties without putting long-term plans on hold.
This change is a sign of a maturing financial system. As access to formal credit becomes wider and faster, the conversation must also evolve. Success cannot be measured only by how many loans are sanctioned or how quickly they are disbursed. It must also be measured by how responsibly those loans are offered, understood and repaid. In my view, that is where the real strength of India’s credit ecosystem will be defined over the coming years.
The next phase of India’s credit story will not be defined only by innovation or technology. It will be defined by confidence. Customers are more likely to engage with formal lending channels when they understand how products work, know what is expected of them and believe that the institution on the other side is acting fairly. Trust, once established, encourages responsible borrowing and strengthens the financial system as a whole.
Trust starts before the first EMI
Every lending relationship begins with confidence, and confidence comes from clarity.
For a lender, responsibility extends well beyond evaluating an application. It involves understanding whether the proposed loan suits a customer’s repayment capacity, explaining the terms in plain language and ensuring there are no surprises after disbursal. Customers should know exactly when repayments are due, what the repayment schedule looks like and what their obligations are throughout the tenure of the loan.
Every loan comes with a clearly defined repayment date for the principal amount, interest and any applicable charges. Understanding this due date is the first step towards maintaining a healthy repayment record. When borrowers are aware of their commitments from the beginning, they are better equipped to plan repayments and manage their finances effectively.
In an increasingly digital lending environment, where approvals happen within minutes, transparency becomes even more important. Technology should remove paperwork, not understanding. A seamless experience should never come at the cost of informed decision-making.
Borrowers have an equally important role. A loan should be viewed as a financial commitment, not simply as available credit. One habit I encourage every borrower to develop is treating a loan decision with the same care as any other long-term financial commitment. Looking beyond the immediate requirement and considering how repayments will fit into future expenses creates confidence not just during the loan tenure, but well after it has ended.
Small habits shape strong credit
Over the years, one lesson has remained consistent. Financial discipline is rarely built through big decisions. More often, it is shaped by small, consistent habits.
Keeping track of repayment dates, setting reminders and maintaining a financial cushion wherever possible are simple practices that reduce the likelihood of missing an instalment. They also help build a healthy repayment history, something that benefits customers well beyond a single loan.
Of course, life does not always go according to plan. An unexpected medical expense, a delay in business payments or a temporary disruption in income can affect anyone. Financial setbacks are a reality for many households and businesses. They should not automatically be viewed as a sign of poor financial behaviour. What often makes the greatest difference is how quickly the situation is acknowledged and addressed.
Open communication allows both borrowers and lenders to work towards practical solutions while preserving a relationship built on trust.
This is also where awareness becomes important. If the principal, interest or any applicable charges are not paid in full on the agreed repayment date, the account becomes overdue. Many borrowers assume there is an informal grace period after the due date, but under the regulatory framework, an account is recognised as overdue from the due date itself when the complete dues remain unpaid.
The loan account is flagged as overdue as part of the lender’s day-end process for the due date, irrespective of the time at which the process is completed, in line with the Reserve Bank of India’s regulatory framework.
Knowing the journey matters
Many borrowers are familiar with the idea of a due date, but fewer understand what happens if an account continues to remain overdue.
The RBI framework introduces Special Mention Account, or SMA, categories to recognise the early stages of repayment stress. These classifications are designed to identify potential repayment challenges early and encourage timely action from both borrowers and lenders.
SMA classification is carried out as part of the lender’s day-end process for the relevant calendar date, and the classification date corresponds to the calendar date for which the day-end process is run.
Depending on how long the dues remain unpaid, an account may move through different SMA categories. Accounts overdue for up to 30 days fall under SMA-0. If the overdue period extends beyond 30 days and up to 60 days, the account moves to SMA-1. Further, accounts overdue for more than 60 days and up to 90 days are classified as SMA-2.
For instance, if a repayment due on March 31 remains unpaid before the lender’s day-end process for that date, March 31 becomes the date of overdue recognition. If the dues continue to remain unpaid, the account may move through subsequent SMA categories as the overdue period increases.
These categories are not meant to discourage borrowing or create anxiety. Their purpose is to highlight early signs of repayment difficulty and provide an opportunity for timely corrective action.
Early identification of repayment stress benefits everyone involved. For borrowers, it serves as a reminder to reassess their repayment position before delays become more difficult to manage. For lenders, it provides an opportunity to engage proactively and reinforce responsible repayment behaviour.
Equally encouraging is the fact that repayment behaviour can be corrected. When the entire overdue amount, including principal, interest and other applicable dues, is cleared and there are no arrears as of the relevant day-end process, the account can be upgraded to the Standard category in accordance with the applicable regulatory framework. For borrowers with more than one credit facility, such upgradation is subject to the repayment of the entire arrears of principal, interest and other applicable dues across all such facilities. A temporary financial challenge does not have to define a borrower’s long-term credit journey. Timely action and financial discipline can help restore stability.
Looking beyond the loan
India’s lending landscape has changed dramatically over the past few years, and it will continue to evolve as technology, financial inclusion and consumer awareness grow together.
As India’s formal credit market continues to expand, the opportunity before the industry is much larger than extending finance to more people. It is about strengthening financial confidence. Every transparent lending practice, every informed borrowing decision and every timely repayment contributes to a culture where credit is viewed not as a last resort, but as a reliable financial tool.
Regulations will continue to evolve alongside the lending landscape, and rightly so. Yet the most meaningful outcomes cannot be achieved through regulatory frameworks alone. They are built through everyday interactions that encourage trust, accountability and financial awareness.
If we succeed in creating customers who are as confident about managing credit as they are about accessing it, we will have achieved something far more valuable than faster loan approvals. We will have built a stronger credit culture, one that supports individual aspirations while strengthening India’s long-term economic resilience.
