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The Bank of Maharashtra estimates that its credit loss provisions will be between Rs 125 and Rs 150 cr every quarter. References

According to a source speaking on condition of anonymity, the Bank of Maharashtra anticipates making an additional expected credit loss (ECL) provisioning of Rs 125–150 crore each quarter in order to comply with RBI standards. The source went on to say that the bank has made an additional provision of Rs 2,500 crore for the ECL standards. In contrast to the current system, which makes provisions after losses are incurred, the RBI's proposed ECL model states that banks will need to identify stress far earlier. The RBI released regulatory recommendations in March 2020 to help non-banking financial organizations (NBFCs) embrace Indian Accounting Standards (Ind AS). On the other hand, a significant step toward banks' eventual transition to the IND-AS regime will be the adoption of the ECL standards. To comply with Reserve Bank of India (RBI) regulations, the Bank of Maharashtra intends to set aside an extra ₹125–150 crore every quarter for Expected Credit Loss (ECL) provisioning. By foreseeing possible credit losses ahead of time, this proactive approach seeks to improve the bank's financial resilience in comparison to the conventional incurred loss model. Interestingly, the bank has already allocated an additional ₹2,500 crore to fulfill these ECL requirements. In contrast to the current system, which makes provisions only after losses are incurred, the RBI's proposed ECL framework compels banks to identify and provide for credit stress well in advance. This change is a component of a larger trend toward Indian Accounting Standards (Ind AS), which place a strong emphasis on early credit risk identification. The adoption of ECL standards is a major step for banks moving to this regime, even if Non-Banking Financial Companies (NBFCs) have already embraced Ind AS. Risk assessment techniques must be completely modified in order to implement the ECL model. Banks are required to create strong credit risk models that take into account variables including Exposure at Default (EAD), Loss Given Default (LGD), and Probability of Default (PD). To guarantee accuracy and efficacy, these models should undergo independent validation and frequent reviews. In order to supervise the ECL implementation process, ensure regulatory compliance, and preserve financial stability, institutions must also set up robust governance frameworks. By encouraging early identification and mitigation of credit risks, the implementation of the ECL framework is expected to increase the resilience of the banking industry. It does, however, come with drawbacks, such as the requirement for superior data, sophisticated modeling skills, and efficient governance frameworks. Banks like the Bank of Maharashtra are essential to improving the general stability and resilience of India's financial system as they go through this shift.

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