LoanProvisioning
Banks seek one more year to implement new loan provisioning system
Mumbai: Banks have appealed to the RBI for an additional year to implement the Expected Credit Loss (ECL) system for loan provisioning, said media reports.
Currently, banks allocate funds when an asset becomes non-performing. However, once the new system is implemented, it is anticipated to have a one-time effect on banks' profits.
IBA's chief executive Sunil Mehta has said the banks have requested an extension to prepare for the implementation of ECL, a report in the media stated.
The banking sector is well-prepared, as some banks have already established their systems and organized their data, which they can utilize to develop risk models based on Expected Credit Loss (ECL), he said, according to the report.
The Reserve Bank of India (RBI) has issued its proposed guidelines regarding the transition to Expected Credit Loss (ECL) methodology. However, an exact timeline for the implementation of these guidelines is still pending and yet to be determined.
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