Fitch Ratings says Indian banks are sufficiently capitalised to transition to the expected credit loss (ECL) provisioning framework once it takes effect, after the Reserve Bank of India (RBI) finalises the rules. Fitch reports that the ECL framework is scheduled to begin on April 1, 2027. The ratings agency expects the Indian banking system’s average Common Equity Tier 1 (CET1) ratio to decline by about 30 basis points in the financial year 2027–28 as banks move to the new provisioning approach. Fitch adds that, if banks use the RBI’s four-year transition period, the CET1 decline could extend gradually to around 80 basis points by 2022–23. It also notes that starting provisions at banks are higher than expected, which may reduce the immediate impact of the new requirements. Fitch links this view to its assessment of the operating environment for Indian banks, maintaining a positive outlook on the BB+ score. Overall, Fitch’s position is that the move to ECL is manageable for bank capital levels, subject to the transition path and provisioning dynamics.
Fitch says Indian banks are prepared for RBI’s ECL provisioning shift
Fitch Ratings says Indian banks are sufficiently capitalised to transition to the expected credit loss (ECL) provisioning framework once it takes effect, after the Reserve Bank of India (RBI) finalise...
- Fitch Ratings assesses that Indian banks have sufficient capital to transition to the RBI’s expected credit loss (ECL) framework.
- The ECL framework is scheduled to start on April 1, 2027.
- Fitch expects the banking system’s average CET1 to fall by about 30 basis points in FY 2027–28.
- Using RBI’s four-year transition period, Fitch expects the CET1 decline could reach around 80 basis points by FY 2022–23.
- Fitch says banks’ starting provisions are higher than expected, which may lessen the near-term impact of the new rules.
MUMBAI, - Indian banks are sufficiently capitalised to transition to the expected credit loss (ECL) framework, which has now been finalised by the Reserve Bank of India, Fitch Ratings said on Thursday.The new framework will come into force starting April 1, 2027.Also Read | Public sector banks rush to build up wealth management assetsThe ratings agency expects the banking system's average common equity tier 1 (CET1) to decrease by 30 basis points in the financial year 2027-28.The decline will gradually extend to about 80 basis points by 2022-23 if banks use the RBI's four-year transition period, Fitch says.Starting provisions of banks are higher than expected, lowering the impact of the new rules.The framework supports Fitch's positive outlook on the BB+ operating environment score for Indian banks.
3 months agoThe ratings agency expects the banking system's average common equity tier 1 (CET1) to decrease by 30 basis points in the financial year 2027-28
3 months ago
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