New Provisioning Regime

• A discussion paper of the Reserve Bank of India revealed that the bank is moving closer towards ring fencing the banking system from credit losses.
• It proposes to move to provisioning on the principles of ‘expected losses’ from ‘incurred losses.’ The move would be over a period of five years.
• The Central Bank further added that to further enhance the resilience of the banking system, it proposes to amend the prudential regulations governing loan loss provisioning by banks
• This would result in incorporating the more forward looking expected credit losses (ECL) approach as against the extant “incurred loss” approach,”

However, banks have sought clarification from RBI on this. Here is an excerpt on this: