Overview
- The RBI, which published its final directions Monday, confirmed an April 1, 2027 rollout and rejected banks’ pleas for more time.
- The rules move lenders from an incurred-loss method to a forward-looking Expected Credit Loss approach with three stages, while the 90‑day bad-loan trigger remains and income shifts to an effective interest rate method.
- The transition includes a calibrated glide path to March 2031, a one‑time capital impact arrangement, and three years to apply the interest method to existing loans, requiring new data, models, and systems.
- Analysts expect higher upfront provisions that could trim bank capital by about 40–80 basis points and cut profits by roughly Rs 50,000–60,000 crore, with public sector and mid‑tier banks taking the larger hit and big private banks better cushioned.
- Following Tuesday’s market reaction, bank shares fell with state-run lenders down more than private peers, and some brokerages say faster insolvency timelines could improve recoveries over time and partially offset the near‑term strain.