RBI May Lower Stage 2 Loan Provisioning, Banks Seek Feedback

Imagine banks have loans, and some of these loans might not get fully paid back.

The Reserve Bank of India (RBI) is thinking about new rules called the Expected Credit Loss (ECL) model to help banks prepare for this.

One part of these rules involves setting aside money for loans that are a bit risky (Stage 2 loans).

The RBI might lower the minimum amount banks have to set aside for these loans.

However, the banks feel that the current rules under the ECL model could make them set aside too much money, which could hurt their profits.

They lend to important areas like farming and small businesses, and they have special rules for those.

Banks are asking the RBI to listen to their concerns and get their feedback before making the new rules official, so the rules are fair and manageable for everyone.