Loan provisioning in banks: RBI for expected loss-based approach

Bankers say with low NPAs and high provisions, the time is ripe for global standards

RBI
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Reserve Bank of India

Subrata PandaAbhijit Lele Mumbai
With robust asset quality, high capital adequacy, and provisions cover, bankers on Friday said the time was appropriate for the Reserve Bank of India (RBI) to prepare lenders to adopt the “expected credit loss” (ECL) regime in making provisions for loans.

The ECL approach and framework for securitising stressed assets will make the system robust.

But the implications -- the extent of the burden and need to use the capital pool for any enhanced provisions -- will become clear only when the RBI spells out the details in a discussion paper, they said.

Banks now make provisions on the incurred

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First Published: Sep 30 2022 | 9:32 PM IST

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