Banks have requested the Reserve Bank of India (RBI) for one more year’s time to implement the system of Expected Credit Loss (ECL) for provisioning of loans.
PTI quoted industry lobby grouping IBA’s chief executive Sunil Mehta saying, “We have requested the regulator to allow us little more time to prepare ourselves for this.” Answering a specific question on the time sought, Mehta said, “we have requested them (RBI) for one more year”
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He also added that in the “worst case scenario”, the banking system is gearing up for the switch to the new system.
“… the banking sector is already geared up, few of the banks have already developed their systems (and) have got their data in place on which they can design their ECL-based risk models,” he said.
What’s the present scenario and what is expected to change?
At present, banks set aside money after an asset turns bad, and once the new system is put in place, it is widely expected to have an one-time impact on banks’ profits.
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The Reserve Bank of India (RBI) has already come up with its proposed guidelines on the switch to ECL but a definite timeline is yet to be decided, PTI report said.
Meanwhile, Mehta said that Russian investors have started investing in Indian government securities after getting a nod from the RBI for the same.
He said the investment activity has come about because of the excess rupee liquidity which the Russians are saddled with due to the trade deficit with India, which is among the few countries buying oil from Russia.
