By Alekh Angre
Copyright indiatimes
ETMarkets.comRepresentational
Kolkata: The Reserve Bank of India has told large banks to get prepared for adopting expected credit loss framework of provisioning with prudential floors and the revised Basel III capital norms from April 1, 2027The central bank has also proposed a glide path till March 31, 2031 to ease the impact of likely higher provisioning burden These measures aimed at “strengthening the resilience and competitiveness of the Indian banks”, RBI Governor Sanjay Malhotra said Wednesday.Expected credit loss is a forward-looking accounting standard that requires banks to make provisions based on expected losses over the lifetime of the loans disbursed.This proposed framework and the revised capital norms will be applicable to Live Eventsscheduled commercial banks, excluding small finance banks, payment banks, regional rural banks and financial institutions”They will be given a glide path (till March 31, 2031) to smoothen the one-time impact of higher provisioning, if any, on their existing books,” the governor said.Moreover, the central bank will reduce risk weights on lending to MSMEs and residential real estate as it plans a standardised approach for credit risk.To be sure, capital requirements for operational risk have already been finalised in 2023 whereas the capital requirements for market risk are under finalisation.”These measures will help align our guidelines with international standards adapted to our national conditions and priorities, and strengthen the capital adequacy framework for banks and AIFIs,” Malhotra said.In parallel, the central bank plans to introduce risk-based deposit insurance premium with the currently applicable flat rate of premium as the ceiling. This will incentivise sound risk management by banks and reduce premiums to be paid by better rated banks. Add as a Reliable and Trusted News Source Add Now!
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Read More News onRBI guidelinesexpected credit loss frameworkBasel III capital normsresilience of Indian bankscompetitiveness of Indian banksReserve Bank of Indiarbisanjay malhotra
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(You can now subscribe to our Economic Times WhatsApp channel)Read More News onRBI guidelinesexpected credit loss frameworkBasel III capital normsresilience of Indian bankscompetitiveness of Indian banksReserve Bank of Indiarbisanjay malhotra(Catch all the Business News, Breaking News, Budget 2025 Events and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online….moreless
