Banks have requested the RBI for one more years' time to implement the system of Expected Credit Loss (ECL) for the provisioning of loans. At present, banks set aside money after an asset turns bad, and once the new system is put in place, it is widely expected to have a one-time impact on banks' profits.
"We have requested the regulator to allow us little more time to prepare ourselves for this," industry lobby grouping IBA's chief executive Sunil Mehta told reporters on the sidelines of a Fintech event here on Tuesday.
Banking system is gearing up for the switch to the new system
Answering a specific question on the time sought, Mehta said, "we have requested them (RBI) for one more year." He also added that in the "worst case scenario", the banking system is gearing up for the switch to the new system. "... the banking sector is already geared up, few of the banks have already developed their systems (and) have got their data in place on which they can design their ECL-based risk models," he said.
RBI has already come up with its proposed guidelines for the switch to ECL
The Reserve Bank of India (RBI) has already come up with its proposed guidelines for the switch to ECL but a definite timeline is yet to be decided.
Meanwhile, Mehta said that Russian investors have started investing in Indian government securities after getting a nod from the RBI for the same. He said the investment activity has come about because of the excess rupee liquidity which the Russians are saddled with due to the trade deficit with India, which is among the few countries buying oil from Russia.