Union Bank of India working with two external agencies for ECL norms implementation, says CFO

Union Bank of India

Union Bank of India is working with two external agencies for implementation of the Expected Credit Loss (ECL) norms, chief financial officer Avinash Prabhu said on October 30.

He added that the bank have a methodology in place for the ECL norms. "We quite you know we have a parallel system running in terms of how ACL should be computed automatically."

The bank have done a provisions on the standard assets in the July-Septem quarter worth Rs 882 crore, as compared to Rs 446 crore in a quarter ago period.

Expected Credit Loss (ECL) framework of provisioning for bad loans, with prudential floors, is proposed to kick in from April 1, 2027, the Reserve Bank of India (RBI) Governor Sanjay Malhotra said on October 1 during the monetary policy announcement.

The norms will be applicable to Scheduled Commercial Banks (excluding Small Finance Banks (SFBs), Payment Banks (PBs), Regional Rural Banks (RRBs)) and All India Financial Institutions (AIFIs), the Governor had said.

The guidelines are expected to enhance credit risk management practices and promote better comparability of reported financials across institutions. The framework is designed to be implemented in a non-disruptive manner with a suitable glide-path, the RBI said during its October 1 MPC statement.

The ECL model, proposed by RBI, has mandated that banks must recognize stress much earlier, in contrast to the existing regime in which they make provisions after losses are incurred.

The guidelines require banks to classify financial assets into three stages based on credit risk. Stage 1 assets will be provisioned at 12-month ECL; Stage 2 assets at lifetime ECL for significant increase in credit risk; and Stage 3 assets at lifetime ECL for credit-impaired exposures.

Further, the managing director and chief executive officer Asheesh Pandey said there is no communication from the government on the consolidation of the state-owned banks.

On October 24, Moneycontrol had reported that State-owned lenders have not yet received any communication from the government regarding the next round of public sector bank (PSB) consolidation.