Indian banks well placed to transition to ECL provisioning: Fitch

Indian banks are sufficiently capitalised to ​transition to the expected ​credit loss (ECL) framework, which has ‌now been finalised by the Reserve Bank of India, Fitch Ratings said on Thursday. The new framework will come into force starting April 1, 2027.

The ratings agency expects the banking ‌system's average common equity tier 1 (CET1) to decrease by 30 basis points in the financial year 2027-28.  The decline will gradually extend to about ​80 basis points by 2022-23 if banks use ‌the RBI's four-year transition period, Fitch says.

Starting ‌provisions of banks are higher than expected, ‌lowering the impact of the new rules. The ‌framework supports ​Fitch's positive ​outlook on the BB+ operating environment score for Indian ‌banks.