Banks submit expected credit loss impact estimates to RBI

Banks have informed the Reserve Bank of India (RBI) about the financial impact of a proposed regime where they have to make early provisions for the loans they expect to sour, the regulator’s response to a Right to Information (RTI) request showed.

- Shayan Ghosh

The so-called expected credit loss (ECL) model proposed by the regulator earlier this year, where banks have to recognize stress much earlier, is in contrast to the existing regime where banks make provisions after the losses are incurred.

On 16 January, RBI released a discussion paper on shifting from the incurred-loss approach to the ECL model, a transition aimed at making the banking system more resilient. The regulator sought comments by 28 February.