The Reserve Bank of India (RBI) released the final guidelines in April 2026, making the shift from overdue ageing-based asset classification to a forward-looking, risk-based model, under the expected credit loss (ECL) framework, aligning banks with Ind-AS standards. This approach requires banks to estimate losses using probability of default, loss given default and exposure at default, enabling earlier recognition of credit deterioration and more proactive risk management. The ECL framework sets slightly higher minimum provisioning requirements than current norms, leading to increased provisions for most product segments, although recent improvements in asset quality should mitigate the overall impact.

Exhibit: ECL floors under draft directions

*Under current IRAC norms, most of the product segments carry a provision requirement of 0.40% except for SME, HL/LAP and farm loans at 0.25%, commercial real estate (CRE) at 1.0% and CRE (residential) at 0.75% Source: RBI; BS – Balance sheet