Banks get 4 years to spread provisions for ECL norms

RBI proposes lower risk weightings for loans to MSMEs, residential housing

- MANO)IT SAHA

The Reserve Bank of India (RBI) has decided to give a glide path of four years starting 1 April, 2027, to banks to spread higher provisioning requirements while transitioning to the expected credit loss (ECL) framework from the current incurred loss framework. The RBIalso proposed tweaking risk weightings for loan to micro, small &medium enterprises (MSMEs) and residential housing loans, which will release capital for banks.

This new framework of provisioning with prudential floors is proposed to be made applicable to all Scheduled Commercial Banks with effect from 1st April 2027. ECL norms will not be applicable for Small Finance Banks (SFBs), Payment Banks (PBs), Regional Rural Banks (RRBs) and All India Financial Institutions (AIFIs).

“They will be given a glide path (till March 31, 2031) to smoothen the one-timeimpact of higher provisioning, if any, on their existing books,”

New norms ata glance