Overview

• The Reserve Bank of India published draft directions on October 7 for an expected credit loss framework and a revised standardised approach to credit risk, inviting comments until November 30, 2025.
• The ECL draft applies to Scheduled Commercial Banks while excluding Small Finance Banks, Payments Banks, Regional Rural Banks and All India Financial Institutions, replacing incurred-loss provisioning with forward-looking staging and retaining current NPA classification rules.
• Proposed capital rules introduce more granular risk weights for corporates, MSMEs and real estate, and classify credit-card transactors within the regulatory retail category.
• The guidelines are slated to take effect on April 1, 2027 with a glide-path through March 31, 2031 to phase in the changes.
• The RBI expects a one-time increase in provisions but a minimal impact on minimum capital requirements, supported by a transitional adjustment that flows into CET1 each year.