RBI To Meet Banks On Nov 12 Over ECL Provisioning Norms: Report

The Reserve Bank of India (RBI) will convene a meeting with bankers and industry stakeholders on November 12 to discuss the new Expected Credit Loss (ECL) provisioning framework, according to Moneycontrol. Lenders are requesting more flexibility in the implementation of the new accounting rules, such as adjusting provisioning percentages and spreading provisions over multiple years.

They fear recognizing the entire provisioning burden immediately could negatively impact profitability and capital adequacy. The RBI has reportedly expressed openness to considering industry feedback before the new norms become effective. During a meeting on November 3, State Bank of India (SBI) Chairman C S Setty stated that the regulator plans to collect feedback from bank CEOs about their readiness for the transition.

However, industry representatives are worried about being prepared for the implementation. A senior banker revealed that most public and private sector banks are not entirely ready to adopt the new framework, except for a few with international reporting requirements. As a result, banks might ask for a phased transition if the RBI maintains the planned implementation date.

The RBI has not responded to requests for information on the meeting as of the report's publication. Effective April 1, 2027, banks will need to transition from the current incurred-loss provisioning model to the new forward-looking ECL approach. The framework categorizes financial assets into three stages based on credit risk, with Stage 1 assets needing provisions for expected credit losses within a year, while Stage 2 and Stage 3 assets must account for losses over the asset's remaining lifetime.

Banks must also use forward-looking macroeconomic assumptions when estimating potential losses. The current 90-day timeframe for classifying loans as non-performing assets will remain the same. The upcoming discussions could help decide if banks receive additional flexibility during the transition.