RBI to publish paper on expected loss-based approach for loan provisioning

Banks now make loan loss provisions on incurred loss model, wherein provisions are made after defaults

The Reserve Bank of India (RBI) wants banks to adopt the expected credit loss (ECL) regime for provisioning of loan assets and it will shortly come out with a discussion paper on the transition, said Governor Shaktikanta Das on Friday.

Banks in India are currently required to make loan loss provisions on incurred loss model, wherein provisions are made after occurrence of default.

“A more prudent and forward-looking approach is the expected loss-based approach, which requires banks to make provisions based on an assessment of probable losses. As a step towards converging with globally accepted prudential norms, we will issue