New Delhi, May 4 Indian banks are well positioned to implement the Reserve Bank of India’s new Expected Credit Loss (ECL) framework and absorb the initial impact on its capital, a report said on Monday.
The report from CareEdge Ratings said that the sector’s strong Capital Adequacy Ratio of over 17 per cent and a Common Equity Tier I ratio exceeding 14.5 per cent, provide adequate room for the change.
The ratings agency estimated that the impact of shifting to ECL models would be roughly 60 to 70 BPS on the sector's capital adequacy, which the banks would be able to absorb easily over the four-year period allowed by the regulations.
The RBI has notified the Commercial Banks – Asset Classification, Provisioning and Income Recognition Directions, 2026, effective April 1, 2027.
Under the revised framework, banks are required to undertake a comprehensive fair valuation of their entire loan portfolio, including all outstanding advances, at the time of transition.
The report noted, however, that the increase in forward-looking provisions, particularly for Stage 2 assets, is expected to exert some pressure on banks’ Return on Total Assets (ROTA) during the implementation phase.
In another report, the ratings agency assessed that UAE’s recent exit from OPEC will have only a neutral impact on its credit profile in the near‑to‑medium term, with potential revenue gains and growth partly offset by heightened regional conflict.
"The recent exit of UAE from OPEC could increase the likelihood of market-driven crude oil prices and could weaken OPEC’s cohesion and reduce the effectiveness of coordinated supply management over the medium-to-long term," the report said.
It reflects an emerging geopolitical realignment within the Gulf region, with the UAE prioritising strategic and economic autonomy. The full implications of this step will be visible over the medium term, it added.
Over the medium-to-long term, greater production autonomy will enable the UAE to better align output with its expanding capacity, supporting improved fiscal revenue and higher export volumes over the medium term.
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