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

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.