RBI publishes a study on banks’ estimated loss-based approach for loan loss provisioning

The Discussion Paper (DP), which the Reserve Bank of India (RBI) released on Monday, sought to extensively analyse a number of issues and offered a framework for the adoption of an expected loss-based strategy for provisioning against loan loss by Indian banks.

The RBI stated that the “recommended strategy” is to create principles-based rules that are supplemented by regulatory backstops when appropriate.

It is planned to exclude regional rural banks and smaller cooperative banks from the framework (based on a threshold to be determined based on opinions).

This news was written by Ms. Pujari Dharani, Research Assistant, all India Legal Forum.