RBI’s new Expected Credit Loss framework is set to weigh on profitability repeatedly, not just as a one-off capital shock. PSU banks may take a larger hit because provisioning floor rates remain unchanged, pressuring returns on assets. The outlook varies across private banks, with some cushioned by contingent buffers while others could face sharper effects.
Indian banks will move to Expected Credit Loss ECL norms starting April 1, 2027, shifting provisioning from only past defaults to losses expected over time. Dinesh Kumar Khara says banks are already prepared and the impact is manageable. The change is expected to strengthen the system’s resilience against future economic stress by improving how credit risk is recognized.
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