Bank of Maharashtra is expecting Rs 125-150 crore of additional expected credit loss (ECL) provisioning every quarter to meet the Reserve Bank of India’s (RBI) guidelines, source told Moneycontrol on conditions of anonymity.
Source further added that bank has estimated Rs 2,500 crore additional provisions for the ECL norms.
The ECL model proposed by the RBI says that banks will have to recognize stress much earlier, in contrast to the existing regime in which they make provisions after losses are incurred.
The RBI, had in March 2020, rolled out regulatory guidelines for the implementation of Indian Accounting Standards (Ind AS) by non-banking financial companies (NBFCs).
Whereas, the implementation of the ECL norms for banks will be an important step towards their eventual shift to the IND-AS regime.
Last year, then RBI governor Shaktikanta Das had said that ECL norms adoption will be rolled out this year. “On ECL norms, we are working on it and it is in the final stages. It will be out in the current financial year. All the comments have come and it is in the final stages of examination,” he told CNBC-TV18 on July 11, 2024.
Under the new framework, banks need to classify their financial assets into one of three categories - Stage 1, Stage 2, and Stage 3 - depending on the assessed credit losses on them.
This will be at a time of initial recognition as well as on each subsequent reporting date, and then make necessary provisions.
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