RBI forms an external working group for ECL-based framework

RBI has 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, 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.