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Banks flag gaps in ECL implementation, seek RBI clarity on existing provisions, loan classification

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Banks flag gaps in ECL implementation, seek RBI clarity on existing provisions, loan classification

Banks flag gaps in ECL implementation, seek RBI clarity on existing provisions, loan classification

The Reserve Bank of India is set to meet banks on November 12 to discuss the implementation of the expected credit loss (ECL) framework, with lenders looking to flag concerns over the treatment of excess provisions held under existing norms, crop-cycle-based agricultural loans and fair valuation of investment portfolios. Banks are seeking clarity on these issues as they assess the provisioning impact of the transition.

Banks want RBI to clarify the treatment of crop loans, where repayment cycles do not necessarily follow conventional days-past-due norms.

Fair valuation of Held-to-Maturity portfolios and concessional employee loans could have additional provisioning implications for lenders.

Banks are also seeking clarity on whether excess provisions already made under the existing IRAC framework can be reversed during migration to ECL.

SBI has estimated a Rs 19,500 crore net-of-tax impact, while other large public sector banks have estimated requirements running into thousands of crores.

Banks are seeking clarifications from the Reserve Bank of India ( RBI ) on several aspects of the Expected Credit Loss (ECL) framework, including the treatment of agriculture loans, valuation of Held-to-Maturity (HTM) investment portfolios and the reversal of excess provisions made under the existing Income Recognition, Asset Classification and Provisioning (IRAC) framework, people aware of the discussions told ETBFSI. The clarifications assume significance as banks prepare to transition to the new forward-looking provisioning framework from April 1, 2027, with the interpretation of certain provisions potentially increasing the provisioning requirements for lenders.


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