Draft ECL framework: Banks plan to move RBI for lower Stage-II floor

Banks are planning to make a representation to the regulator shortly. The deadline for submitting feedback on the draft ECL framework is November 30

Commercial banks are planning to request the Reserve Bank of India (RBI) to lower the provisioning requirement for Stage-II loans as proposed in the draft Expected Credit Loss (ECL) framework for loan-loss provisioning released last month.

 

For Stage-II loans, most of which fall under the Special Mention Accounts 1 or 2, (SMA1/SMA2) in the current incurred-loss regime, the RBI has set a floor, or minimum requirement, of 5 per cent (of loan exposure) provision in the ECL regime. Banks generally make 0.4 per cent provisions for such loans now.

 

According to a senior banker from a large public-sector bank, the