Banks submit expected credit loss impact estimates to RBI
MUMBAI : Banks have informed the Reserve Bank of India (RBI) about the financial impact of a proposed regime where they have to make early provisions for the loans they expect to sour, the regulator’s response to a Right to Information (RTI) request showed. The so-called expected credit loss (ECL) model proposed by the regulator earlier this year, where banks have to recognize stress much earlier, is in contrast to the existing regime where banks make provisions after the losses are incurred.
On 16 January, RBI released a discussion paper on shifting from the incurred-loss approach to the ECL model, a transition aimed at making the banking system more resilient. The regulator sought comments by 28 February.
Mint filed an RTI request seeking a copy of the comments received from stakeholders but was informed by the central public information officer, Deepak Chikhale, that the information was exempt from disclosure. Thereafter, RBI executive director Radha Shyam Ratho responded to an appeal and directed the CPIO to revisit the query and provide a revised reply.
“Some of the feedback contains data on the plausible financial impact on these entities, which, if made public now, might be misused and misconstrued, thereby impacting the competitive interest of these entities," Chikhale said in a revised response. RBI also said that the information being sought—stakeholder comments on the discussion paper—concerns an upcoming regulation, and releasing related documents in the public domain before the issue of final guidelines may affect an objective examination of the issues.
In their responses to the draft circular, lenders have pointed out certain provisions they are uncomfortable with. According to the chief financial officer
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