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RBI forms an external working group for expected credit loss-based framework

October 05, 2023

RBI forms an external working group for expected credit loss-based framework
The Reserve Bank of India (RBI) on Wednesday constituted a nine-member external working group to get independent views on Expected Credit Loss (ECL) based framework for provisioning by banks.

In January this year, the RBI had released a discussion paper for adoption of an expected loss-based approach for loan loss provision by banks. The RBI had sought comments on the paper till February 28.
 
Currently, banks are required to make loan loss provisions based on an incurred loss approach which needs banks to provide for losses that have occurred or incurred.
 
In a press release issued on Wednesday, the RBI said several comments have been received from various stakeholders on the issues flagged in the discussion paper, which are being examined by it.
 
“While the regulatory stance to be taken in respect of each of the issues shall be examined by the Reserve Bank, it has been decided to constitute a Working Group in order to get independent inputs on some of the technical aspects having a bearing on the significant transition involved,” the release said.
 
The working group will be chaired by Prof R Narayanaswamy, former Professor, IIM Bangalore. The other members include Sanjay Kallapur, ISB, Hyderabad, Rajosik Banerjee, KPMG, S Srinivasa Rao, SBI, Rajendra Khandelwal, ICICI Bank and Susanta Baishya, HDFC Bank.
 
Canara Bank’s Adish Yadav, Saraswat Co-operative Bank’s Pravinkumar Taparia and Equitas Small Finance Bank’s Sridharan N are also part of the group.
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