In response to numerous comments from stakeholders on the “Introduction of Expected Credit Loss Framework for Provisioning by Banks” discussion paper, the Reserve Bank of India (RBI) has decided to constitute an external Working Group. The aim is to gather independent insights on various technical aspects associated with the transition involved in this framework.
The Working Group will be chaired by Prof. R. Narayanaswamy, former Professor, IIM Bangalore and shall consist of domain experts from academia and industry as well as representatives from select banks: Prof. Sanjay Kallapur, ISB, Hyderabad; Rajosik Banerjee, KPMG, S Srinivasa Rao, SBI; Rajendra Khandelwal, ICICI Bank; Susanta Baishya, HDFC Bank; Adish Yadav, Canara Bank; Pravinkumar Taparia, Saraswat Co-operative Bank; Sridharan N, Equitas Small Finance Bank.
The Terms of Reference for the Working Group wil be as follows:
i. Delineate the principles that will be required to be considered by banks while designing the credit risk models to be used for assessing and measuring expected credit losses.
ii. Recommend factors that banks should consider for the determination of credit risk based on the guidance provided in IFRS 9 and principles laid out by BCBS.
iii. Suggest the methodology to be used for undertaking external independent validation of the models.
iv. Recommend, based on comprehensive data analysis, prudential floors for provisioning.
v. Any other issue incidental to the above.
The recommendations of the Working Group will be duly factored in while framing the draft guidelines, which will be put in the public domain for comments before the issue of final guidelines, the RBI stated in a release.