ECL framework to improve banks' overall credit culture: Indian Bank CEO

Bank targets around 13-15 per cent growth in the next two years. The bank’s managing director and chief executive officer, Binod Kumar, shares his views on the transition to expected credit loss (ECL), the impact of GST 2.0, and second-quarter results, in an interview with Shine Jacob in Chennai.

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You are in a transition phase to ECL. What are your thoughts with regard to the Reserve Bank of India (RBI) norms?

= I want to appreciate the RBI for the timing. This is the time when banks are in good health. You have to come out with measures with a onetime impact, and hence the timing is important. There are a lot of positives and impacts. The overall credit culture will improve in the banks, and the credit portfolio will become more risk-sensitive.

Some technological expenditure will also happen for data requirements. Banks will be able to manage risk in a better way, resulting in less capital charge. We make provisions when something goes wrong. This move will transform us from an incurred loss model to a predictive approach. There will be an impact. ECL is a function of probability of default (PD) and loss-given default (LGD). For PD, there is a five-year window, which is good. LGD they have put a bit higher, and there will be some impact on that account. We are assessing it.