Banks to flag high loss-given default provisioning

With the Reserve Bank of India set to close feedback on its draft expected credit loss framework by November 30, banks are seeking more flexibility on the loss-given default assumption of 45% for exposures secured by eligible collateral. Lenders argue that this could overstate the loss potential in certain asset classes. “While the move to ECL is directionally correct and aligns with global practice, some lenders may seek a longer implementation runway beyond 2031, as the RBI has done with earlier transitions such as Basel norms” Pratish Kumar, Partner at JSA said. “Stage-2 provisioning will be a key area of adjustment, particularly for smaller banks and those with higher retail exposures,” he added. Read more