India central bank's new proposal on loan loss provisions to raise bank capital needs - analysts

Published on: Monday 16 January 2023

The Indian central bank's discussion paper suggesting banks make provisions on bad loans using an expected credit loss (ECL) method could raise capital requirements for lenders, analysts said. On Monday evening, the Reserve Bank of India released the paper proposing a shift away from the current method - where loan loss provisions are made after a default - to one where banks will need to assess the probability of default upfront and provision accordingly. The new mechanism will recognise problems ahead of time and make the banking system more resilient in the long run but could raise capital requirements significantly particularly for government owned banks, analysts at Macquarie Research said.

News source: https://www.yahoo.com/now/india-central-banks-proposal-loan-035403996.html

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India central bank's new proposal on loan loss provisions to raise bank capital needs - analysts